China's property investment slows in July as Beijing tightens curbs

[BEIJING] China's property investment slowed to its weakest pace this year in a sign the housing market's resilience may be waning as Beijing toughens its crackdown on speculative investments and holds back on new stimulus.

Property investment, which mostly focuses on the residential sector but also includes commercial and office space, is a key driver of growth in the world's second-largest economy.

Real estate has also been one of the few bright spots in the economy, which is dealing with the effects of a bruising trade war with the United States.

However, China's real estate has become increasingly polarised in recent months, with some cities showing signs of overheating and others rapidly cooling.

Beijing has dashed hopes it would ease its bubble-curbing measures to boost the faltering economy, saying in a high-profile work meeting in July it will not use the property market as a form of short-term stimulus.

At the same time, there are concerns further cooling could lead to painful repercussions for local government such as shrinking revenues. A slowdown has been felt deeply in many provincial cities after the real estate market hit a downturn in late 2018.

Property investment in July rose 8.5 per cent year-on-year, easing from June's 10.1 per cent gain and was the slowest since December's 8.2 per cent, Reuters calculation based on National Bureau of Statistics (NBS) data on Wednesday showed.

It still grew 10.6 per cent from the prior year for January-July, compared with a 10.2 per cent increase in the same period last year and 10.9 per cent in the first six months.

The moderation was in line with shrinking factory activity and a worse-than-expected contraction in producer prices seen in July, which have added to broader worries about the prospects of a global recession.

Property sales by floor area - a key gauge of demand - grew 1.2 per cent in July from a year earlier, recovering from a 2.2 per cent drop in June, according to Reuters calculations.

For the first seven months, however, sales still fell 1.3 per cent following a 1.8 per cent decline in January-June.

Funds raised by China's home developers grew 7 per cent on-year in January-July, lower than a 7.2 per cent increase in the first six months, official data showed and pointing to growing financial strains for residential developers as China tightened its grip on money flowing to the property market.

Beijing has made it harder for developers to raise new capital. Earlier this month, authorities launched a nationwide bank inspection to crack down on loans illegally directed to property market.

Access to foreign investment through the offshore bond market has also been further restricted, while major trust companies involved in real estate investment suspended new fund-raising for home developers following window guidance from regulator.

New construction starts measured by floor area slowed, rising 6.6 per cent on-year in July, versus a 8.9 per cent gain in the prior month, according to Reuters calculations. For January-July, new construction starts rose 9.5 per cent versus a 10.1 per cent increase in January-June.

REUTERS