China May property inflation eases to 4.2 percent

China's annual property inflation eased to 4.2 percent in May, extending a slowdown in recent months after a series of heavy-handed tightening measures by the government to cool price rises and deflate a bubble. But it is still too early to declare victory. The government has been relying heavily on administrative measures to curb demand and there is a still plenty of easy money sloshing around the economy, analysts say.
Housing inflation in May was the slowest since the start of the year, according to Reuters calculations from latest official data published on Saturday. It also marks the fifth consecutive decline in annual housing inflation since Reuters started to calculate China's national property price index when the National Bureau of Statistics stopped publishing it at the start of this year. New home prices in April climbed 4.3 percent from a year earlier compared to 5.2 percent in March, according to earlier data.
The latest price data showed China's tightening steps, including home purchase restrictions alongside higher down payments and mortgage rates, have been biting. The mild slowdown, together with robust property investment and sales data released on Tuesday, should assuage worries about an imminent collapse of the real estate market and a hard landing in the world's second-largest economy.
Standard & Poor's ratings agency on Wednesday lowered its outlook on China's real estate market to negative from stable and predicted property prices will fall 10 percent over the next 12 months. Moody's downgraded the sector in mid-April while Fitch still holds a stable outlook.
Many analysts have warned that a bursting of a property bubble is the biggest risk threatening the world's second-largest economy in the medium to long term. The National Bureau of Statistics said annual new home prices fell in three of the 70 cities it monitored in May, compared with three in April and two in March. In month-on-month terms, nine cities saw lowering prices, compared with nine in April and 12 in March.