China new home price gains accelerate in June

China's new home price gains accelerated in June, with the increases concentrated in smaller cities.

New home prices rose month on month in 63 of the 70 cities surveyed by the national bureau of statistics (NBS) in June, compared with 61 in May.

Robust real estate investment growth and buoyant home prices are likely to offer strong support to construction steel prices for rest of this year. Real estate projects consume nearly half of the steel sold in China.

Beijing, Shanghai and Shenzhen, China's three largest property markets, have shown little growth in home prices for most of this year and the trend continued in June. Prices in Beijing and Shanghai were flat in June from a month earlier, and down by 0.1pc and 0.2pc respectively compared with June last year. Shenzhen's new home prices rose by 0.3pc from May but fell by 1.3pc year on year. Curbs on second home purchases, tighter regulations on home buying by non-residents and higher up-front payment requirements have cooled property markets over the past few months.

Haikou, the capital of China's island province of Hainan, posted the highest month-on-month price gain of 3.9pc in June, while prices also increased by more than 3pc in smaller cities such as Sanya, Jinan and Dandong.

China's real estate investment growth rate was 9.7pc in January-June, up from 7pc in 2017. Real estate investment is likely to continue to grow strongly in the second half of the year, the NBS said

Property prices in third and fourth-tier Chinese cities continue to accelerate and the central government will tighten regulations further to slow price increases, the NBS said. But inventories are rising in remote parts of China because of population outflows, meaning policies are needed to encourage home sales. The Chinese government views the current home pricing situation as stable overall.

Additional curbs on home prices in smaller cities could squeeze real estate investment growth. But the completion of many investments is likely to lead to strong steel demand when these projects enter construction stage over the next several months. China's excavator sales, a leading indicator of construction activity, increased by 60pc year on year in January-June.