The housing market has ‘apparently cooled.’
As a consequence of a dizzying buying frenzy in September, the average price of new homes in China soared 11.2% from a year ago, after a 9.2% jump in August, the National Bureau of Statistics reported today. It was the 12th month in a row of year-over-year gains, and the largest increase on record.
The average price of new homes rose in 63 of the 70 cities in the index. It dropped in six cities and remained flat in one. But all heck broke lose in tier-one cities: In Beijing, the average price skyrocketed 27.8%, in Shanghai 32.7%.
This comes after authorities have unleashed a tsunami of liquidity that triggered a record borrowing binge. In response to the prior deflation of China’s house price bubble, and the social unrest it began to entail as folks saw their life savings evaporate, the People’s Bank of China cut interest rates six times in the eleven months leading up to October 2015. The benchmark mortgage rate dropped to a historic low of 4.9%. Last month, the medium- and long-term loans to households, mostly mortgages, ballooned by 571 billion yuan, as the total value of new homes sold (a function of price and volume), according to Bloomberg calculations, soared 61% year-over-year, nearly double the increase in August.
This post was published at Wolf Street on October 21, 2016.