China’s housing market closely monitored

China’s frothy property market may
have peaked after a government clampdown on speculators, new data has shown.

Property prices across 70 cities
fell 0.1 per cent in June compared with May – the first monthly fall since
February 2009.

Meanwhile, separate trade figures
released at the weekend showed exports surging, but imports lagging.

The data paints a mixed picture for
the Chinese economy, which some economists and investors fear may suffer a
sharp slowdown later in the year.

In April, the Chinese government
introduced a series of new regulatory restrictions on the housing market that
sought to restrict speculative buying.

These included higher down-payments
on house purchases, stricter lending rules for property developers, and limits
on the ability of investors to buy more than one home.

Many economists, investors and
policymakers – both inside and outside China – worry that Chinese real estate
may be experiencing a bubble brought on by excessively low interest rates,
which has fuelled speculators.

Despite the monthly fall in June,
property prices across China still remained 11.4 per cent higher than a year
ago.

Financial markets are now assessing
whether Beijing will successfully pull off a soft landing in housing prices, or
whether the Chinese property market will now deflate in the same painful way
the US market has done since 2007.

The property market restrictions
are just one dimension of a general move by Beijing to cool the economy down,
in the face of accelerating inflation.

Data released by the Chinese
central bank showed a continued slowdown in bank lending – which is tightly
regulated in China.

Net new lending fell to $89 billion
in June, down 5.6 per cent from May, and down more than half compared with a
year ago.

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