China prices showing signs of stability

China’s housing market has had tentative signs of stabilization, despite the continuing pressure on house prices in January, as the Danske Bank‘s latest report shows. The results are based on home prices for China’s 35 major cities that are recently released by China’s National Bureau of Statistics (CNBS).

China’s new home prices in January eased further from 1.6% y/y to 0.5% y/y, but seasonally adjusted new home prices increased 0.2% m/m in January after declining 0.3% m/m in December. This is the first month-on-month increase in new home prices since June last year.
Existing home prices also dropped further from -0.3% y/y to-1.4% y/y, while the pace of decline in seasonal adjusting existing home prices appears to be easing at 0.2% m/m in January compared to 0.4% m/m in December and 0.5% m/m in the same month last year.

The demand-supply balance of new homes in late 2011 started to stabilize as housing completions declined. A significant drop in housing at the start of 2012 suggests that the supply of new homes should continue to decline substantially and the demand-supply balance will continue to improve over the course of the year.

Analysts at Danske Bank expect home prices to decline by 3%-4% for 2012. However, they remained positive that the current slowdown in the Chinese housing market will only be slightly more severe than its experience in 2008/2009.

The author, Flemming J. Nelson, is the Senior Analyst at Danske Bank. The bank is authorized and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulations of the relevant regulators in all other jurisdictions where it conducts business.

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