BEIJING—China’s red-hot housing market shows signs of cooling, according to government data, news that is likely to encourage Chinese leaders who face mounting political pressure from urban residents unable to afford new homes.
Property prices are still going up: They were 10.7% higher than a year earlier in February, the National Bureau of Statistics said, even as prices of food and other daily necessities are also rising. The consumer-price index was up 2.7% in February from a year earlier, the bureau said Thursday, the fastest rise in more than a year.
However, sales of residential properties are now easing from growth rates of more than 50% late last year, with the data showing an increase of 37% in the first two months of 2010. Figures compiled by real-estate consultancy Soufun, which counts transactions in 30 major cities, show an even sharper slowdown at the beginning of the year: Housing-sales volume was down 49% in February from January, which in turn was down 46% from December.
Falling transactions indicate that high prices and tighter financing are deterring more people in major cities from taking the plunge into what many think is a frothy market.
People getting pushed out of the housing market include Jiang Yun, a 38-year-old marketing executive in Beijing. Since his son was born three years ago, and his parents moved in to help take care of him, his current 86-square-meter (925-square-foot) place in eastern Beijing has seemed quite cramped. But Mr. Jiang can’t find the money to buy a new and bigger apartment at today’s prices.
“I don’t want to put such a big financial burden on our family just to buy a home,” he said. “It’s not exaggerating to say that buying a home can kill a middle-class family in Beijing.”
The surge in property sales and construction has been one of the biggest supports for China’s economic recovery over the past year. But the accompanying jump in housing prices has become a political headache for China’s leaders. It has been one of the key issues at this week’s annual meeting of the National People’s Congress, the legislature.
Premier Wen Jiabao and other officials have repeatedly said the government plans to tackle the problems in the housing market by boosting the supply of subsidized housing and cracking down on speculative demand.
Government policies aimed at deterring speculators now require a 40% down payment for second homes, compared with 30% for first-time mortgage seekers. Banks are facing government pressure to keep lending under control, and some have raised mortgage rates in recent months.
Mr. Jiang says those changes have helped to turn buying a new home from a very expensive proposition to a simply unaffordable one for him.
Government officials are still moving cautiously, haunted by the memory of what many now think was an overly aggressive crackdown on a real-estate boom in 2008 that ended up shutting down the market for months.
“There is no need to issue new policies now,” as officials are still evaluating the effects of measures already taken, deputy central bank governor Su Ning said Monday. This week’s legislative session hasn’t produced any new policies on housing.
“If they did feel things were getting hot right now they could intervene immediately,” said Andy Rothman, China strategist for brokerage CLSA. “I see no indication at all that they want to crash the market.”
Some property analysts do expect prices to ease later this year, as the burst of new housing that developers started last year is finished and comes on the market.
“We anticipate that around the middle of this year we could see a potential turning point from more of a seller’s market to more of a buyer’s market,” said Bei Fu, an associate director at Standard & Poor’s.
That timing could suit potential home buyers like Qu Lei, a 28-year-old who has started his own consulting company. He has been driving around Beijing looking at housing since November, but has been put off by what he calls the “crazy” prices being asked. “I will wait to May to see whether it’s time to buy,” he said.
Mr. Qu still thinks housing prices in China are headed up over the long term. That view is widespread—one of the reasons why real estate is now the preferred investment for the Chinese upper classes. Even the government has a hard time arguing with it.
“I personally think that for the next 20 years there will be great pressure on China’s housing prices to rise, since these years will be a period of rapid urbanization and industrialization. The demand is pretty big and the supply of land is limited,” housing minister Jiang Weixin said Monday.