Chinese home prices are expected to rise modestly this year thanks to government support measures for the sector, relieving some pressure on the faltering economy, a Reuters poll showed on Wednesday. Home prices are likely to rise 2 percent in 2015 from a year earlier, and 3 percent in 2016, according to the median of the poll, which surveyed 14 economists and property market analysts between August 18-25.
Signs of stability in the property sector could ease fears of a sharper slowdown in China's economy, which is heading towards its weakest rate of expansion in 25 years due to a combination of cooling demand at home and abroad. But pick-ups in home prices and sales are unlikely to turn into a full-blown recovery for the sector any time soon, as large inventories of unsold homes weigh on the market and discourage new investment and construction, dampening demand for everything from cement and steel to furniture and appliances.
Property sales bottomed out during the first half of 2015 after declining for more than a year, propped up by a barrage of government support measures since last September, including a series of interest rate cuts and lower downpayment requirements. China cut rates again on Tuesday and lowered the amount of reserves banks must hold, ratcheting up support for the stumbling economy and a plunging stock market.
Home prices rose 0.3 percent in July from June, the third straight month of gains, though they were still down 3.7 percent from a year earlier, official data showed last week. "Favourable credit policies have released pent-up demand and driven up home prices. We expect home transactions in 2015 to surpass last year's volume," said Jason Hu, head of research at Chinese property consultant Holdways in Beijing.
While 10 of 14 respondents in the poll expected no broad recovery in the property market this year, eight of 13 expect home transactions to keep improving in the coming month. Not everyone replied to each question. "Loosening monetary policy and favourable supervision measures have greatly reduced the costs of buying homes. The sustained owner-occupier demand will support the market to recover," said Xu Gao, chief economists at Everbright Securities in Beijing.
Six of 13 respondents thought authorities would take more steps to lift the market, while the rest believed they would not step in. Given China's property market is diverging between cities in terms of performance, analysts thought bigger cities would see sharp price rises this year due to strong housing demand. Respondents said China's property markets are overvalued, a view unchanged since January 2012 when Reuters started the poll.
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