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China home prices seen rising 4% in 2016 on government support
[BEIJING] China's home prices are likely to rise modestly this year as government support measures gain traction, with more easing steps widely expected in coming months, a Reuters poll showed.
A mild recovery in the housing market, which accounts for 15 per cent of gross domestic product, may ease fears that the world's second-largest economy is at risk of a hard landing.
But a rebound in property investment and new construction will still be needed before the sector makes a more significant contribution to broader growth again, creating more jobs and boosting demand for materials from cement to steel.
China's average nationwide home prices are expected to rise 4 per cent in 2016 from a year ago, according to the median of forecasts from 13 analysts polled. That is twice as much as the gain seen in the last poll conducted in November.
"The loosening monetary environment will push up asset prices, though general high inventories (of unsold homes) will limit the room for price rises," said Frank Chen, head of research at property consultancy firm CBRE China.
Housing inventories reached 718.53 million square meters by the end of December, official data showed, which most respondents believed would take over two years to clear.
China's housing market bottomed out in the second half of 2015 after cooling for more than a year, propped up by a barrage of government support measures, including a series of interest rate cuts and lower downpayment requirements.
Top leaders have made reducing the home supply glut one of their top priorities for this year. Last week, China lowered taxes on some property transactions and earlier this month announced further reductions in minimum downpayments required for first- and second-time home buyers.
All respondents surveyed expected more such steps this year as the government tries to stabilise the slowing economy.
"Recent measures are just a beginning," said Xia Dan, an analyst at Bank of Communications. "If property investment remains weak, the government will not stop loosening policy." Growth in property investment dwindled to 1 per cent in 2015, the slowest in nearly seven years, while new construction starts fell 14 per cent.
But some analysts see the beginnings of a turnaround as government policies revive confidence in the market.
Ten of 15 respondents thought property investment would pick up this year, compared with the November poll, when more than half thought growth would continue to slow.
However, the recovery could be uneven, with analysts predicting a further divergence between smaller and larger cities. Since much of the property overhang is believed to be in smaller cities with less robust demand, analysts said those areas were most at risk of steep price falls this year.
Poll respondents also still see Chinese home prices as slightly expensive. On a scale of 1 to 10, where 1 is extremely cheap and 10 is extremely overvalued, the median reply was 7, higher than 6.5 in the last poll.