China's month-on-month home price growth remains robust in May

© Reuters. The Wider Image: Shanghai's nail naighbourhood© Reuters. The Wider Image: Shanghai’s nail naighbourhood

By Yawen Chen and Ryan Woo

BEIJING (Reuters) – Prices in China's sizzling property market kept pace in May with the previous month, indicating resilient demand despite the imposition of tougher official measures to curb surging prices.

Firm price gains highlight the challenge Chinese authorities face in taming an overheating market without disrupting the economy, in which real estate is a major driver of growth.

Average new home prices in China's 70 major cities rose 0.7 percent in May from the previous month, in line with April, Reuters calculated from an official survey out on Monday.

Compared with a year ago, new home prices rose 10.4 percent in May, easing from a 10.7 percent gain in April, Reuters calculated from National Bureau of Statistics (NBS) data.

Policymakers have prioritized stabilizing an overheated market ahead of a Communist Party reshuffle later this year.The NBS said price growth for new homes in China's 15 most overheated cities – mainly provincial capitals – has remained “basically stable” from the previous month as city-based control measures continued to take effect.

Prices for new homes in China's biggest cities such as Beijing and Shanghai stopped climbing in May on a monthly basis, while prices fell 0.6 percent in Shenzhen, the fastest seen in three months.

Central bank data published last Wednesday showed Chinese banks extended more credit than expected in May, with home loans expanding even as policymakers struggled to rein in riskier borrowing without impeding economic growth.

Household loans, mostly mortgages, rose to 610.6 billion yuan in May from 571 billion yuan in April, accounting for 55 percent of total new loans last month, up from 52 percent in April, the data showed.

Investors, banned from the hottest markets, are increasingly looking inland, driving up prices in more remote, smaller cities with fewer buying restrictions, leading to a surprise pick-up in May sales.

Sales by value in smaller cities have risen 30 percent so far in 2017 compared to a year ago, said Sam Xie, head of research at property services provider CBRE China.

But economists say new tightening measures introduced since mid-March have started taking some heat out of the market.

Annual growth in China's real estate investment slowed in May, the first fall-off in three months, taking a toll on new developments as new construction starts almost halved from the previous month, official data showed last Wednesday.

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