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China's May property investment growth slows as curbs bite

BEIJING -China's real estate investment rose in May at its weakest clip this year as policy tightening on developers' financing and mortgages gradually kicked in, although growth stayed resilient.

Real estate investment in May rose 9.8per cent from a year earlier, slowing from April's figure of 13.7per cent, Reuters calculations, based on data from the National Bureau of Statistics on Wednesday, showed.

For the period from January to May, property investment grew 18.3per cent over the corresponding period last year, slower than an increase of 21.6per cent in January to April.

"Housing investment growth will likely further soften this year," said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.

"We need to watch out for pressure facing developers whose financing activities are constrained by the official debt ratio caps."

With China's economy rebounding from last year's coronavirus-induced slump, authorities have stepped up efforts to clamp down on rampant borrowing in the sector this year to curb speculative activity and prevent an asset bubble.

Regulatory measures include borrowing caps placed on developers known as "the three red lines", and caps on property loans by banks. Banks in major cities recently also hiked mortgage rates.

Property sales by floor area rose 9.2per cent in May from a year earlier, slower than April's growth of 19.2per cent, Reuters calculations showed.

New construction starts, measured by floor area, fell 6.1per cent in May, narrowing from the 9.3per cent decline in April.

The weak construction figure could have been affected by slower land purchases by developers under the centralised land supply scheme in major cities, said Lu Wenxi, the chief analyst of property agency Centaline.

Some firms are cautiously controlling their leverage ratio by slowing the pace of building new projects in order to meet the "the three red lines", Lu added.

Funds raised by China's property developers grew 29.9per cent on the year, down from growth of 35.2per cent in the first four months.

Comparisons to last year are highly skewed by the sharp drop in activity early in 2020 because of COVID-19 lockdowns. Still, home prices have been extending gains on a monthly basis despite rising curbs on developers and buyers.

A Reuters poll in June found property investment was expected to rise 7per cent in 2021, in line with the pace of 2020, while home prices were seen rising 5per cent.

(Reporting by Colin Qian, Lusha Zhang and Ryan Woo; Editing by Barbara Lewis and Clarence Fernandez)

Source: Reuters

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