China's Oct property investment, sales growth at 3-month low

Beijing

CHINA'S property investment and sales growth both eased to a three-month low in October, suggesting a critical pillar of the economy is softening, but new construction surged in a sign developers are rushing to promote sales.

Some analysts say overall signs of weakening in the property sector could give provincial governments an excuse to loosen curbs as economic growth slows to near 30-year lows.

Property investment is a key growth driver for China. A robust housing market has helped counter a slowdown in the manufacturing sector as a 16-month trade war with the US slashed profits and investments for factories.

Real estate investment in October grew 8.8 per cent from a year earlier, the slowest pace since July, down from September's 10.5 per cent expansion, according to Reuters calculations based on National Bureau of Statistics (NBS) data on Thursday.

For January-October, property investment rose 10.3 per cent from a year earlier, versus a 9.7 per cent gain in the same period last year and 10.5 per cent in the first nine months.

The downbeat readings aligned with worse-than-expected factory activity contraction and steepest producer inflation in over three years reported last month.

"Not only were last month's data weak, but further weakness lurks ahead. Real estate is primed for a further moderation as financing to the sector is being squeezed by a regulatory crackdown," Martin Lynge Rasmussen, a China economist at Capital Economics, said in a note.

Property sales by floor area, a key barometer of demand, rose 1.9 per cent on year in October, also the slowest since July and lower than September's 2.9 per cent growth. That compared with a 3.1 per cent sales drop seen in October last year.

For the 10-month period, sales increased 0.1 per cent on an annual basis, recovering marginally from a 0.1 per cent drop in the first nine months.

The weakness in October, which is traditionally a high season for new home sales and dubbed "Golden September and Silver October", was in line with sluggish transactions in smaller cities.

October's property transactions fell 8 per cent on-year in 25 major tier-two and tier-three cities, data from private research firm CRIC showed.

Developers may continue to face pressure on sales as costs for buyers increase amid steadily rising home prices.

The average mortgage rate for first home purchases posted its fifth month-on-month growth in October, although the uptick was smaller compared with September's reading, according to a market report cited by state-backed Economic Information Daily.

Household loans, mostly mortgages, fell to 421 billion yuan (S$82 billion) in October from 755 billion yuan in September, central bank data showed.

Bucking the bearish trend, however, October saw new construction starts measured by floor area soaring to its highest in more than a year, up 23.2 per cent from a year earlier versus a 6.7 per cent rise in September.

Some analysts say that reflects developers' rush to launch more projects in a bid for quicker returns on sales.

Funds raised by China's property developers increased 7 per cent year-on-year for the 10-month period, slightly lower than a 7.1 per cent gain in January-September, official data showed.

Moody's said in October that liquidity remains adequate for most rated Chinese property developers despite tighter financing controls, but refinancing risk will likely increase for weaker developers because of short-term debt and high exposure to trust loans. REUTERS