HONG KONG (Reuters) - China's property investment growth quickened to 6.2 percent in the first three months of 2016, as national sales growth accelerated to near three-year high on a range of official stimulus measures.
Area of property sold in the first quarter grew 33.1 percent, compared to 28.2 percent in the first two months of 2016, the highest since May 2013, according to data from the National Bureau of Statistics (NBS) on Friday.
The growth in real estate investment, a major driver of the economy which affects more than 40 other sectors from cement to furniture, was up from an increase of 3 percent in the January to February period.
"In our view the uptick in construction is premature and we are skeptical whether it can be sustained. While inventories of unsold housing have eased somewhat they are still too high and need to come down more," said Louis Kuijs, economist at Oxford Economics based in Hong Kong.
But in the smaller cities, with less well-disciplined developers and weaker demand, inventories of unsold housing have not fallen enough.
China's largest commercial developer Dalian Wanda Commercial Properties (HK:3699) said last month it would scale back investment and construction in third and fourth-tier cities because of oversupply.
Adding to the inventory problem in the lower-tier cities, sales in two major big cities were also seen plunging in the last two weeks after authorities made it tougher to buy homes in the bigger cities to prevent a property bubble, weighing on the national property sales pick-up.
The total floor area sold in Shenzhen fell a weekly 28 percent in the week beginning March 28, the first day after the new rules took effect on March 25. The floor area sold fell another 25 percent in the following week, data from China Real Estate Index System (CREIS) showed.
Shanghai sales fell 52 percent and 7.5 percent respectively in the same two consecutive weeks.
April's official data, which reflects the impact of the tightening measures, will be released in mid-May.
Last month new property development starts were up 19.2 percent despite efforts by developers to sell off bloated inventories of unsold homes, and inventory floor area was 13.1 percent higher than a year earlier.
"The current housing construction pick-up supported overall GDP growth in Q1 and should do so in Q2. However, we think it is likely that the property construction cycle will ease again and that the government will need to continue to rely on other drivers, including infrastructure investment, to meet its ambitious growth target of 6.5 to 7 percent for 2016," said Kuijs.