China's property downturn continues into second month

Beijing

CHINA's home prices fell for the second consecutive month in October from a year earlier, official data showed on Tuesday, pointing to a persistent property downturn - despite government efforts to lift the market.

The price drop was the biggest since Reuters started calculating nationwide housing prices in 2011, when the National Bureau of Statistics stopped issuing nationwide price data.

The deceleration in the property market, which accounts for about 15 per cent of China's economy, intensified concerns that a softening housing sector would hold back growth. "In the near term, we'll probably still see the adjustment continue. House prices will continue to decline and real estate investment will continue to slow down," Haibin Zhu, chief economist at JPMorgan in Hong Kong, said.

Tuesday's price news follows official figures last week showing that property sales fell 1.6 per cent in October in terms of floor space, from September's 10.3 per cent drop.

Property investment, which affects more than 40 other sectors from cement to furniture, grew 12.4 per cent between January and October from a year ago, its slowest pace in more than five years.

Average home prices in 70 major Chinese cities fell 2.6 per cent last month, double the fall expected by financial markets, after dropping 1.3 per cent in September.

Compared with the previous month, home prices were down 0.8 per cent in October, a sixth consecutive monthly drop following September's drop of 1.0 per cent, according to Reuters calculations from data published on Tuesday by the National Bureau of Statistics(NBS).

New home prices fell month-on-month in 69 of the 70 major cities the NBS monitors, unchanged from September.

To stop property prices from sliding further, the government cut mortgage rates and downpayment levels in late September for some home buyers, taking one of its biggest steps this year to boost an economy increasingly threatened by a sagging housing market.

But the bad loan ratio rose at Chinese banks rose to 1.16 per cent at the end of September, up 0.09 percentage points from June, adding to concerns that the slow economy and cooling property market might hit banks and increase financial risks.

In another development, the government said on Tuesday growth in foreign investment into China slowed in October.

Foreign direct investment (FDI) - which excludes financial sectors - totalled US$8.53 billion for the month, the commerce ministry said, up 1.3 per cent year-on-year.

The figure compares with a gain of 1.9 per cent in September, which came after a four-year-low in August of US$7.20 billion.

For the first 10 months of 2014, FDI amounted to US$95.88 billion, the ministry said, a decline of 1.2 per cent year-on-year.

Chinese authorities have in recent months launched anti-monopoly, pricing and other inquiries into foreign firms in sectors ranging from auto manufacturing and pharmaceuticals to baby milk.

The probes have raised concerns among investors that Beijing is targeting overseas companies, which the commerce ministry has repeatedly denied.

But China's appeal as an investment destination has declined in recent years in the face of rising labour and land costs and competition from other South-east Asian countries such as Vietnam. REUTERS, AFP