China’s new-home prices rebounded nationwide for the first time in 13 months in May from April, suggesting the property downturn is bottoming out, Reuters reported.
However, the overhang of inventory and new constructions could continue to drag on the economy this year, the news agency said.
Average new home prices in China’s 70 major cities climbed 0.2 percent in May from April, the first rise since May 2014, Reuters calculated from official data published on Thursday. The figure was flat in April.
On an annual basis, the prices fell for the ninth consecutive month to down 5.7 percent, narrowing from a 6.1 percent drop in April, the report said.
Bottoming-out of new home prices is unlikely to lead to a recovery in property investment this year, economists said.
The lag between sales and new starts in the current cycle is expected to be longer than the six to eight months previously seen, due to high inventory levels — especially in lower-tier cities.
Official data last week showed residential inventory in May was 21.9 percent higher than a year ago, though it had eased 0.2 percent compared to April.
“Nine months of good sales growth may lead indicators to show recovery in property investment, but any recover will be more muted than what we saw in the past,” said Louis Kuijs, Greater China chief economist for RBS.
The property industry accounted for around 12 percent of China’s economic output in the first quarter, but the sector’s slump has hit demand for everything from steel and cement to appliances and furniture — industries that account for about 30 percent of GDP.
Property investment growth slowed to 5.1 percent in the first five months from a year earlier, official data last week showed, while the floor area of property sold dropped just 0.2 percent, narrowing from a 4.8 percent decline in January to April.
The National Bureau of Statistics data showed new home prices in Shenzhen recorded a second consecutive annual rise, up 7.5 percent, accelerating from 0.7 percent gain in April.
Signs of overheating recurred in the southern city, with some would-be home sellers tearing up signed sales contracts in anticipation that prices there will continue to surge.
Other first-tier cities such as Beijing and Shanghai, however, both dropped 2.3 percent, while Guangzhou slipped 4.8 percent.
The three cities, however, reported respectable month-on-month increases of 1.1 percent, 2.2 percent and 1.4 percent respectively.
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