Several new property projects got listed in the market in January under unreachable price tags. It was a surprising result after a year-long property curb. But some analysts still find that the overall market is cooling.
Housing prices in China have once again started to jump this year. Home buyers are questioning the effect of tough curbing measures employed in 2013. The culprit could be the role land plays in local governments' finances.
"The marketization measures promised by the government haven't taken effect yet. And the old curbing measures are still ongoing. So, now it's a blank period when the policy sentiment is unclear. More importantly, local governments still see land sales as a major source of income. So, they're still actively leasing land," said Chen Aipin from Shenzhen Housing Research Association.
Looking ahead, China's surging property market may have finally hit the skids. Sales declined sharply in January compared to December even when controlling for softness caused by the Spring Festival holiday. That's according to China Confidential, a Financial Times research group. Official data shows that prices remained high in December, but would fall in the coming months.
Property-sector loans accounted for one-third of total loans last year but a slowdown could mean trouble for real estate developers. That's because many borrowed through shadow finance channel and could struggle to pay back retail investors who effectively loaned to them via wealth management products. A lot of that investment has flowed through China's shadow banking system, the unregulated credit that allows banks to shunt loans to dodgy borrowers.
Housing investment remains a big engine in China's economy. Slower growth could help end China's dangerous reliance on credit-backed investment but an abrupt slowdown would rattle global markets and throttle commodity prices.
Source: Xinhua
