Prakash Sakpal, Economist at ING, suggests that in China with reducing excess housing inventories being a major task for this year housing policy is a watching brief for new stimulus measures.
Key Quotes
“The 70-cities new home price data for February is due tomorrow at 9.30am local time. As of January, 38 cities reported sequential increase in new home prices, up from two a year ago, and 24 cities reported decrease in prices, down from 64 a year ago. We think these trends persisted based on large increases in home sales and mortgage loans in the first two months of 2016; the residential floor space sold rose by 30.4% YoY in volume and by 49.2% in value and new mortgage loans grew by 36.2% in January and February.
Location remains the factor. Home prices in Tier 1 cities are booming, up 1.8% MoM and 19.3% YoY (simple averages) in January, while Tier 2 and beyond markets are less buoyant. The slow turnaround in home prices in higher tier cities may be a signal the oversupply is more than can be grown into on any reasonable time horizon. A Bloomberg report of mayor Huang Qifan of Chongqing, a Tier 2 southwestern city, identifying clearing excess property inventory among his top priorities to steer economic recovery looks promising.
We remain of the view that prospects for a growth turnaround depend on reducing the drag from housing. The authorities have identified reducing excess housing inventories as a major task for this year and housing policy is a watching brief for new stimulus measures.”
(Market News Provided by FXstreet)
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