China’s housing sector rally moderates on strict mortgage lending norms

The rally in the real estate market in China eased for the second straight month in a row as strict government measures governing mortgage norms curbed mortgage lending in some of the country’s biggest urban and suburban areas.

Among 70 major Chinese cities surveyed, 55 saw increases in new home prices between May and June. In May, there were housing price increases in 60 cities, data released by China's National Bureau of Statistics showed Monday. Residential home prices in 10 cities fell between June and May, while only four cities reported price declines in May.

Shenzhen and Xiamen saw the highest jumps in home prices, climbing 47.4 percent and 34.0 percent, respectively, from a year ago, excluding government-funded public housing. Home prices in first-tier cities such as Shanghai, Beijing and Guangzhou contributed to overall growth, with increases of 33.7 percent, 22.3 percent, and 19.4 percent, respectively, from a year ago, although the pace in price rises has slowed.

The restrictions by the government include increasing mortgage down payment requirements and tightening mortgage loans to some housing categories. The ruling body further announced banning loans to buyers purchasing their third house on June 30.

The continuous pace of price rise in the property sector has fuelled concerns that the Chinese economy is grappling the signs of a debt-driven growth. Growth in the real estate sector jumped 8.8 percent in the second quarter from a year ago, according to NBS data released on Saturday. The property growth rate outpaced the gross domestic product growth rate of 6.7 percent in the April-June period.

Meanwhile, analysts and other market participants forecast that housing prices in China will continue to rise in the country’s second and third-tier cities.