Cooling property sector in focus as economy slows

BEIJING -- A weaker-than-expected performance by China's property sector is testing authorities' policy moves as growth in the world's second-largest economy slows, new official data has showed.

A total of 201.11 million square meters of property was sold in the first quarter of 2014, down 3.8 percent year on year, the National Bureau of Statistics (NBS) said on Wednesday.

The fall widened from the 0.1-percent drop seen in the first two months of the year. In terms of sales revenue, the volume went down 5.2 percent year on year to 1.33 trillion yuan ($215.9 billion).

Meanwhile, investment in property development climbed 16.8 percent in the first quarter, retreating 2.5 percentage points from the rate seen in the first two months.

The slower property investment is seen as a major drag on China's fixed asset spending in the first quarter, which in turn weighed on broader growth that eased to 7.4 percent during the period.

"The weak property data implies that the government will likely quicken social housing to fill the gap in residential fixed asset investments, and some restrictive measures could be slightly eased in some low-tier cities," Lu Ting, China economist at Bank of America Merrill Lynch, said in a research note.

Wednesday's data came as China's red-hot housing market is showing increasing signs of cooling down, with a remarkable regional divergence between first-tier cities and less developed regions.

In mega-cities like Beijing and Shanghai, home prices are growing at a milder pace while a majority of second- and third-tier cities are facing downward pressures, fanning fears that the property bubble may suddenly burst and threaten the stability of the whole economy.

At a press conference on Wednesday, NBS spokesman Sheng Laiyun dismissed such concerns, saying the current market dynamic is normal.

"Related authorities will closely watch changes in the market, improve property control policies and set up a long-term mechanism to ensure the steady and healthy development of the property sector," Sheng said.

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