China’s escalating property prices have long been a concern for Beijing as it balances growth targets with social stability. Now, economic signals are giving the go-ahead to authorities for sustained efforts to cool off the real estate market.
On Monday, China’s National Bureau of Statistics reported average new home prices in the country’s 70 major cities rose 0.2 percent in September, Reuters calculations show. That comes after the last two years saw substantial increases.
Compared with the year-ago period, new home prices rose 6.3 percent in September, cooling from an 8.3 percent increase in August, Reuters calculations show.
This tapering off in price increases came after a series of government measures in the last year to cool the red-hot property market amid fears of an asset bubble.
Last Wednesday, President Xi Jinping signaled that the state is likely to continue managing the property market. At the opening of a once-every-five-years leadership confab, Xi said “housing is for living in, not for speculation.”
For their part, Chinese authorities will now have room to let the property market relax after good growth data in the last week, said Phillip Zhong, senior analyst at research firm, Morningstar.
On Thursday, China reported third-quarter growth data at 6.8 percent that met expectations.
The “strong GDP number will give policymakers the room as well as confidence to continue the tightening policy without the fear of a slowing property sector dragging down the entire economy,” Zhong told CNBC.
Real estate contributed 6.5 percent to overall GDP in China in 2016, state-owned China Daily reported in January, citing the country’s National Bureau of Statistics.
Last week’s third-quarter data revealed China’s property sector grew 3.9 percent against the year-ago period — down from a 6.2 percent on-year increase for the second quarter. Meanwhile, year-over-year growth in construction activity slowed to 4 percent in the third quarter from 5.4 percent in the second quarter.
The services sector, however, expanded 8 percent year-over-year in the third quarter compared to a 7.6 percent year-over-year second quarter rise — picking up some of the economic slack from the real estate market.