Slight uptick in Chinese housing construction; price trends uneven across cities

Following a downturn in production last year, housing construction revived strongly in the first seven months of this year. Measured in terms of square metres of liveable floorspace, there was a 20 % increase in completions of new apartment buildings and a 13 % jump in new apartment building starts. The rate of new building starts, however, faded a bit with the onset of summer. Compared with previous years, builders are also buying less land use rights for building lots, a trend that suggests only moderate growth in housing construction lies ahead. 

The uptick in construction reflects the recovery in apartment sales, which were up sharply in the first half of this year, both in terms of liveable floorspace and value of sales. Private real estate portal SouFun’s latest survey of around 100 cities found that the average price of a square meter of floorspace in July was 12,000 yuan (€1,600), an increase of 12 % y-o-y. The growth of average housing prices accelerated from June. From the standpoint of emerging risks, it should be noted that on-year growth in the stock of housing loans accelerated in the second quarter to 31 %.

Housing markets in China are quite heterogeneous. Average apartment prices (CNY/m2) runs from about 4,000 yuan (€540) in Baoji in Central China to 53,000 yuan (€7,200) in Shenzhen. While the fastest rise in apartment prices has been in the big cities, the number of smaller cities witnessing on-month overall price declines started to rise in July. SouFun found that apartment prices were falling in almost a third of cities surveyed.