The overheated residential property markets in 15 key cities in China "obviously cooled down" in November, said a research report from the National Bureau of Statistics on Monday, based on housing price data from 70 monitored cities. Prices of newly-built properties went down in four cities, and prices of pre-owned properties declined in seven, showing that measures by various cities to use steps appropriate to local conditions to curb too fast growing housing prices have been effective, and housing prices are stabilizing, said Liu Jianwei, senior statistician with NBS. Average housing prices dropped the most in Chengdu, by 0.8 percent. Shenzhen, Chengdu, Urumqi, Baotou, Mudanjiang, Luzhou and Nanchong also saw drops, said the report. In key cities, housing prices remain basically the same as last year, said Liu. The average price of newly-built residential properties went up 0.1 percent month-on-month in first-tier cities, while the price of pre-owned properties remained the same. In second-tier cities, the growth of housing price was curbed, with the average price of newly-built properties rising slightly at 0.4 percent and pre-owned properties 0.3 percent month-on-month, versus 1.2 percent and 0.8 percent in October, said Liu. Lower-tier cities' housing prices are stable, too, said Liu. More than 20 cities have introduced various policies against speculative buying in a bid to curb too fast growing housing prices and to make sure housing prices are developing in a steady and healthy manner. Market players said that because cities are likely to adjust policies to manage property markets based on their specific market conditions. China's housing markets are still diverging as key cities' prices are rising and lower-tier cities face high inventory. November data reinforce the October data that indicated a rapid slow down in price growth in some of the leading cities, especially those that recorded faster growth for the majority of 2016. Nevertheless the slowdown seems to be more muted in lower tier cities, which weren't subject to the same restrictions, with price growth actually picking up in some of the smallest cities," said James Macdonald, head of China Research. Analysts said "turning points" of housing prices are showing in some key cities for the first time in the last 12 months. That is, their average housing price in the second half of a month is lower than in the first half of the month, reflecting a downward trend. In Beijing, Shanghai, Shenzhen, Nanjing, Hangzhou, Xiamen, Fuzhou, Tianjin and Wuxi, which have seen fast housing price increases since late 2015, housing price growth turned negative in the second half of November, compared to that of first half of November. "We expect that in some cities, fast growth of housing price will turn to slow growth and even slight declines in November and December," said Zhang Dawei, an analyst with Centaline Property in a research note.

Among all the key takeaways of the recent Central Economic Work Conference, two priorities draw special attention. One priority is the promotion of the stable and healthy development of the property market. The conference emphasized the urgency of curbing property market bubbles and speculation. One of the highlights in the Chinese economy over 2016 was the rampant rise of property market prices, starting in Beijing, Shanghai and Shenzhen, and then quickly expanding to a number of the second tier cities, namely Nanjing, Suzhou, Hangzhou, Hefei, Xiamen and Wuhan. It only quieted down somewhat after exceptionally stringent measures announced in late September across dozens of cities. According to the People’s Bank of China (PBOC) official data, outstanding long term consumer loans, mostly home mortgage loans, were 19.36 trillion yuan at the end of November, 2016, 29.1% up over that at the end of January, or a net increase of 4.37 trillion yuan. Forty-eight percent of the total net increase of total bank loans (9.10 trillion yuan), although its total volume accounts for 17.5% of the latter. The fundamental factor behind the sharp property market rises is speculation, buying a house only to sell it later, making considerable profit in a fast-rising market. Hence, houses are no longer living quarters but a financial tool, only for the increase in their face value. The capital, in chasing profits, chases the house deals. Local governments, hungry for money, play a key role in pushing up land prices. In turn, the banks tend to extend mortgage loans to home buyers, not caring whether they are speculators, because they have houses as mortgages. The first consequence is that any further rises in the property markets will lead to a higher debt ratio, and a significant property price fall will definitely lead to a chain of disclosures and bank insolvency risks, and in turn, lead to a systemic financial risk in the country. In that event, the financial crisis will be not far away. The second consequence is dampening the real economy. Property market speculation and bubbles are sucking financial resources at the cost of the real economy. During the first 11 months of 2016, outstanding bank loans to the non-financial business and institutions increased by a merger 4.5%, or a net increase of 3.14 trillion yuan. Its share in total outstanding bank loans fell from 70.0% to 65.2%. Property market speculation usually has a much higher capital return than the real economy, especially manufacturing. TCL, a leading manufacturing giant, also relies on real estate development for a better overall performance. Haier, the world leader of white home appliances, also has huge land plots for real estate development in Qingdao, Jinan, Chongqing and Suzhou.It is nothing new to reaffirm the nature of housing as for living instead of for speculation. Two years ago, the State Council decided to foster housing consumption and made clear its consumption nature. It is, however, unusual that the Central Economic Work Conference, with this explicit position, gave a strong signal that the central government will no longer tolerate the property market bubbles and capital speculation, and all financial, land, tax and legislation measures will be prepared for this purpose. It is expected that more policy tools, including heavy taxes on house trading profits, will be on the horizon so as to make it unprofitable at all. Another priority is a strong emphasis on fostering the real economy. Instead of the hot media words of internet finance, virtual reality, sharing economy and so on, the conference put quality and core competitiveness at the central piece. It means that in the real economic sectors must rely on advances of technology and productivity. What is equally import, the conference did not mention internet plus, but stresses the growth of strategic emerging industries on the one hand, and the upgrading of traditional industries on the other. In recent years, remarks either by the State Statistics Bureau or local governments tend to mention the growth of strategic emerging industries while neglecting the traditional ones. Don’t forget: the strategic industries only accounted for 11.2% of total above-scale industrial output added value in 2015. If there is no growth in the traditional industries, even if the former grows at 15% per year, total industrial output added value could only grow by 2% per year, making 6.5% GDP growth rate unattainable. The conference calls for “craftsmanship”, brand build up and fair competition for small, medium and micro business. In this regard, we should learn from the German “invisible champions” who are mostly small business, rely on the world's finest craftsmanship and offer excellent products with world famous brands. Internet finance, which is an extremely hot word in China, is not mentioned in the official news report of the conference. Instead, it calls for further improving the governance architecture of the state-owned commercial banks and promoting development of private banks. The private Sunning Bank, approved right after the conference, will focus its business both online and offline on supporting the real economy. Another clear signal is thus given that internet finance, while a new model of financial activity supported by internet technology, is only a tool of finance. The financial services, be it online or offline, must serve the real economy instead of a capital movement chasing profit only. Looking into 2017, the Chinese economy, in the process of further supply-side reform and structural changes, must be anchored on a sound real economy, with maximum technology support and minimum property bubbles and capital speculation. Only then, a stable growth at 6.5% (GDP growth rate), with less financial risks, could be secured.

BEIJING - Fresh property curbs in China have led speculators to put property purchase plans on hold, cooling a hot housing market. An investor surnamed Hu, from central China's Henan province, already owns two apartments in Zhengzhou, but is now hesitating to buy a third, after local authorities rolled out a series of measures in early October to cool the property buying frenzy. "There might not be much room for further price increases," Hu said. "I would rather wait and see the policy effect." In Zhengzhou, new home prices went up 7.6 percent in September month on month, but growth slowed to 4.3 percent in the first half of October, according to the National Bureau of Statistics (NBS). Thanks to government curbs, the daily average sales of new homes in the city plunged 61 percent in the first 10 days of October compared to September. Since late September, a wave of property restrictions introduced to several cities across the country has reversed market expectations, cooled speculation and reduced transactions. Price rises in 15 first and second-tier cities have retreated, the NBS said last week, citing market data for the first half of October. In Beijing, the year-on-year growth rate of residential property transactions in the first 16 days of October slowed by 29.3 percentage points from September, according to local government statistics. In Suzhou, Jinan and Xiamen, less affluent cities that had seen home prices surge in the past months, new home sales slumped over 70 percent in the period Oct 10-16 when compared with the weekly average of the previous three months, according to real estate agent Centaline Property. The property market is apparently losing steam, said Zhang Dawei, analyst of Centaline Property, who cited an approximately 40 percent decline in sales this month in most of the 33 cities the company monitors. More and more buyers will take a wait-and-see approach, ending rapid price increases and resulting in price drops in some regions in the fourth quarter of 2016, Zhang said. Ren Xingzhou, a researcher with the China Marketing Association, attributed the market reverse to a change of expectations among buyers, who used to assume house prices would stay on the fast track and scrambled to join the investment boom. As home prices soared in the past few months, many cities saw panic buying from people who feared falling behind on the path to property riches, as well as the rise of "fake divorces," whereby couples divorced on paper so they could avoid house purchasing restrictions. In response, some cities started to tighten purchase limits for single residents, including divorcees, in the latest round of curbs. Other restrictive policies include higher downpayment requirements and stricter mortgage conditions, especially on purchases of second apartments. "The main purpose of the latest property curbs is to contain speculative demand in the market, and to help the sector return to its function of providing places for people to live," Ren said. Tougher restrictions will also help avert credit risks, according to Ren. A credit binge is behind the recent property boom. Loans from financial institutions to the real estate sector soared 25.2 percent year on year to 25.33 trillion yuan ($3.74 trillion) by the end of September, mostly lent to individuals, according to central bank data. China's banking watchdog on Friday warned of financial risks related to the property sector, calling for efforts to ban illegal inflows of loans and wealth management funds to the sector. Alongside government restrictions, routine voluntary credit tightening at year-end by commercial banks will help send home transactions to lows by the end of the year, said Guo Yi, analyst with Yahao Real Estate Selling & Consulting Solution Agency. In the longer term, the property market trend will remain largely influenced by the country's future monetary policy stance, Guo said. The latest home price surges came after two years of progressive policy easing, starting with the relaxation of purchase restrictions in 2014. The momentum was further fueled by the government's pro-growth policies, including interest rate cuts and lower deposit requirements.