China Housing Inventory Still Drags on Economy

China’s new home prices rebounded nationwide for the first time in 13 months in May from April, suggesting the property downturn is bottoming out, although the overhang of inventory and new building could continue to drag on the economy this year.  Average new home prices in China’s 70 major cities climbed 0.2 percent in May from April, the first rise since May 2014, Reuters calculated from official data published on Thursday. The figure was flat in April.

On an annual basis, the prices fell for the ninth consecutive month to down 5.7 percent, narrowing from a 6.1 percent drop in April.  Bottoming-out of new home prices is unlikely to lead to a recovery in property investment this year, economists said.

The lag between sales and new starts in the current cycle is expected to be longer than the six to eight months previously seen, due to high inventory levels – especially in lower-tier cities.  Official data last week showed residential inventory in May was 21.9 percent higher than a year ago, though it had eased 0.2 percent compared to April.