China’s housing prices drop in January, housing investment likely to moderate over time

China’s housing prices fell in the big cities in January. For the first time since May 2015, housing prices in the nation’s first-tier cities recorded a yearly drop. This evidently hints that the deceleration in property has materialized, which might be consistent with China’s deleveraging process.

In the year ahead, China will continue to rein in the credit growth and lower the financial excesses, indicating that housing investment is expected to moderate over time, noted Commerzbank in a research report.

Since 2010, China’s housing investment has been illustrating a downward trend, which was also a significant factor of the deceleration of economic growth in the same period. The further moderation in housing sector might be a drag on the economic growth in the near future, stated Commerzbank.

“That is one of the reasons why we hold a below-consensus GDP forecast for the whole year of 2018. However, a deliberate deleveraging process is necessary as the investment-led growth model has brought about serious structural imbalances”, added Commerzbank.

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