Chinese Home Price Growth Cooled In November, And Is Expected To Keep Cooling In 2014

Chinese home prices climbed in 66 of 70 major cities covered by the National Bureau of Statistics, up from 65 in October.

But prices of new apartments were up 0.53% month-over-month in November, lower than 0.62% the previous month. Second hand home prices also slowed to 0.4%, compared with 0.42% in October.

The cooling in Chinese home prices can be attributed to two key things. First, over ten cities "extended or upgraded their property tightening measures" since November, according to Societe Generale's Wei Yao. Slowing new home sales also fed into weaker home price growth.

"The slowdown in sales growth began in March this year when nationwide tightening measures were announced by the State Council under the previous government," wrote Bank of America's Ting Lu in a note to clients. "Since then, city-specific measures were rolled out in Tier-1 cities first, and later expanded to Tier-2 cities such as Shenyang, Nanchang and Xiamen." These measures tightened household purchase restriction (HPR), weighing on demand.

Here's a comparison of the property tightening measures across Chinese cities from Morgan Stanley:

Second, tighter credit conditions also helped cool home prices since the downpayment on second homes was increased mortgage loans were suspended by some banks.

Both these factors should see housing inflation "moderating gradually in the coming months," according to Yao. Moreover, property fixed asset investment (FAI) has been ticking up and housing starts were up 11.5% on the year in November, from 6.5% the previous month. This points to increasing housing supply in 2014, which should also help cool the pace of home price growth.