April sales adding fuel to fears of China property bubble

BEIJING - Home sales in China fell 18% in April amid tighter credit, with value declining to RMB418 billion from RMB509 billion in March, according to National Statistics Bureau data. The value of total sales from January to April fell 9.9% to RMB1.53 trillion from a year earlier, dragging down China’s overall growth. To combat the decline, at least six smaller Chinese cities have been relaxing local curbs on speculative and investment-driven home buying since the end of April.

The northern city of Zhengzhou in Henan province issued draft rules to promote home purchases by low and middle-income households.

China’s possible property bubble is a key risk to watch in 2014, as the impact of monetary tightening and regulatory scrutiny are compounding the risks of a property bubble, according to a report by Barclays Plc analysts. In an indication of just how exposed the economy is to a property downturn, Moody’s Analytics estimates that the building, sale, and outfitting of apartments accounted for 23% of GDP last year.

The Government currently seems willing to tolerate the downturn to some extent, and is focussing on fine-tuning its macroeconomic policy to stabilise the economy rather than adopting strong stimulus policies.