China's modest price growth -Westpac

Analysts Westpac explained that each year, Chinese data for January and February is affected by the variable timing of the lunar new year holidays - with this year’s celebrations occurring in mid-February, January saw a full month of activity.

Key Quotes:

"From the price detail, it is evident that residential property markets began 2018 as they finished 2017. Tier 1 continues to be held back by authorities, while gains in tier 2 and beyond remain robust.

In the month of January, 52 of the 70 cities reported price gains for new homes, broadly in line with the 2017 average. The existing market has a little less momentum, 45 cities reporting gains in January versus 2017’s average of 54.

Since their late-2016 peak, new home prices in Shenzhen have fallen just 4.2%, while prices in Beijing and Shanghai are broadly unchanged. For existing housing, all three cities have reported little change in prices.

Looking ahead, our base expectation is that tier 1 markets will continue to mark time. Wealth is a substantial support, but the will of authorities is stronger.

In tier 2 and 3, new home price gains are continuing at a solid pace. Indeed, in tier 2, the annual pace of gain has picked up slightly in the past three months, from 5.3%yr to 6.3%yr. Tier 3 growth has been maintained, circa 6.2%yr.

For the existing market, the story is very similar, albeit with more modest price growth, respectively 5.9%yr and 4.8%yr for tier 2 and 3.

Investment data is only available until December 2017 and given new year holidays is unlikely to provide a clear read until the March data is released.

In the interim, the trend to December implies that developers will maintain the size of the new project pipeline, but not materially increase it. Construction and inventory will be managed; and, as a result, the sector’s contribution to growth will be modest versus history.

Stability benefits all involved in these markets. It also aligns well with authorities’ broader aims for 2018 and beyond: ‘quality’ growth and financial stability."