Real estate investment in China remained robust in the first quarter from a year earlier, official data showed Monday, as the pace of new construction quickened, despite intensified government cooling measures.

Growth in property investment, which includes residential, commercial and office spaces, accelerated to 9.1 percent from 8.9 percent in the first two months of 2017, the National Bureau of Statistics (NBS) said.

In March alone, property investment growth rose to 9.4 percent, according to a Reuters calculation based on NBS data.

Most analysts agree an overheating property market poses the single biggest risk to China’s economic growth, with increasingly tough government measures to cool soaring prices raising the risk of a nasty crash.

Policymakers, however, expect to see some moderation in property activity going forward.

“Because the latest round of cooling measures came out after March 17, their impact on the entire economy including home prices may show in April or later,” Mao Shengyong, a statistics bureau spokesman, said at a briefing Monday.

He added houses are for habitation, not for speculative investment.

New construction starts measured by floor area, a telling but sometimes volatile number that gauges developers’ confidence, also quickened to 11.6 percent in the first three months of the year, comparing with a 10.4 percent rise in the first two months, the NBS data showed.

Robust investment and new construction starts in the first quarter defied a slowing trend in sales measured by floor area as more government curbs take effect. Sales grew 19.5 percent in the January-March period from a year ago, down from 25.1 percent in the first two months of the year.

In March, sales by floor area fell to 14.7 percent from a year earlier, NBS data showed.

Property sales recorded their strongest annual growth in seven years in 2016 with an annual gain of 22.5 percent, thanks to a furious property boom in top-tier cities, which eventually spilled over to smaller neighboring cities.

But that has led to the biggest wave of tightening of home purchase and lending rules in recent weeks since October, as China’s red-hot property market picked up pace in February after price gains slowed in previous months.

Real estate investment, which directly affects 40 other business sectors in China, is considered a crucial driver for the world’s second-largest economy. Regulators have pledged to keep the property market stable in 2017.

At least 50 Chinese cities have slapped tougher cooling measures to limit price gains since mid-March, following Beijing’s unprecedentedly harsh curbs that hiked down-payment ratios for second homes to as much as 80 percent.

China’s central bank has also urged banks to strengthen mortgage risk management, and crack down on market irregularities such as making fake divorces to skirt high down-payment fees.

Some of the more draconian government policies included requiring newly bought homes to be held for at least two to three years before they can be sold, a measure against short-term speculation and hailed by analysts as a “policy innovation.”

While home prices soared in large cities, many smaller cities still face a gloomy inventory overhang, even as buyers and developers are increasingly being pushed into smaller markets due to curbs in the top-tier cities.

Growth in inventory floor area by the end of March across China was 6.4 percent lower than a year earlier, compared with a fall of 4.6 percent in the January-February period.

Source: Reuters

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