China’s runaway housing market is slowing down ever so slowly, in what amounts to an early win for Chinese officials worried about its steep rise.
Average housing prices in October rose a seasonally adjusted 1.2% from September, about half the month-to-month increase of before, according to Goldman Sachs researchers. Year-over-year prices posted heady gains, but—importantly for Chinese officials who feared runaway property prices would reverse as quickly as China’s stock prices last year—new rules to dampen rising sticker prices appear to be working.
“These were concentrated in tier 1 and 2 cities, where we observe the most price deceleration,” Goldman Sachs analysts led by Maggie Wei wrote today in Hong Kong.
The government’s measures to slow price gains across big cities included tightened mortgage standards, higher down payment requirements, and bans on non-local buyers. Efforts to circumvent these measures have included moments of near lunacy, including Shanghai couples divorcing so they could buy more properties and people turning to peer-to-peer lenders for down payments.
Real estate is considered the safest investment by Chinese households, so momentum buying can quickly overtake reasonable rises. Prices in big cities have risen 25% this year. And in Shenzhen, for instance, prices rose 75% since the beginning of 2015.
The latest government figures don’t mean China’s property market is cooling off completely. Even though the screaming month-to-month prices rises are slowing down, in the 70 biggest cities prices were still up 12.3% in October from the previous year, after also rising by double-digit percentages in September.
Chinese officials still undoubtedly consider the updated October price figures a win. The challenge now becomes slowing real estate, which is the among the brightest spots in China’s economy, without sending masses of Chinese buyers fleeing into another investment.