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China Q1 property investment growth weakens to near 6-year low, sales drop narrows

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Growth in China's real estate investment in the first quarter slowed to the lowest rate since 2009 as developers prioritised clearing inventory amid a housing glut, while the rate of fall in property sales narrowed.

[HONG KONG] Growth in China's real estate investment in the first quarter slowed to the lowest rate since 2009 as developers prioritised clearing inventory amid a housing glut, while the rate of fall in property sales narrowed.

Property investment growth eased to 8.5 per cent in January to March from a year earlier, the National Bureau of Statistics (NBS) reported on Wednesday, dropping from 10.4 per cent in the first two months of 2015. The 2009 low was 8.3 per cent.

Growth in China's gross domestic product, of which real estate comprises about 15 per cent, slowed to a six-year low of 7.0 per cent in the first quarter as demand stayed weak.

The GDP data met analyst forecasts but built up expectations that authorities will roll out more policy stimulus to avert a sharper slowdown.

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China's stock indexes, which have been on a historic rally since Beijing began easing monetary policy in November, rose slightly after the data release, with the CSI300 index up around 0.4 per cent. The CSI300 real estate sub-index , however, dropped 1.3 per cent.

Property sales volume dropped 9.2 per cent from the year-earlier period, narrowing from a 16.3 per cent decline in the January to February period.

The real estate downturn remains a key risk to China's 7 per cent economic growth target, crimping demand in 40 related economic sectors ranging from steel to cement to furniture.

Weakness in China's property market is expected to persist through at least the first half of the year, despite government efforts to bolster the faltering sector. Policymakers last month said they would cut downpayment levels for the second time in six months and offer bigger tax breaks.

"Although the current policy relaxation will boost sales volume in the near term, developers' pricing power remains limited because inventory remains high and developers with weak liquidity will take this opportunity to offer promotions to boost sales," said Moody's senior analyst Franco Leung.

China Vanke , the country's largest property developer, last month warned of a large inventory of unsold property, and state-backed China Resources Land said the sector will continue to focus on clearing inventory this year.

But the rate of decline in Chinese home prices slowed in March from February, two private surveys showed, adding to hopes the housing market is stabilizing as Beijing enacts policies to bolster a faltering economy.

REUTERS

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