China (online.wsj.com) - China's property prices fell for the fourth straight month in December, adding further pressure on Chinese consumers at a time when both the domestic and global economy increasingly depend on their spending.
The property slump has triggered a slowdown in sales growth of goods ranging from furniture to refrigerators. Investment in residential real estate accounts for about 12% of China's economy, but as much as 25% is tied up in a broader category that also includes industries such as construction materials and appliances, according to economists.
The government had hoped that its efforts to rein in soaring real-estate prices would mean more Chinese would be able to buy homes, which in turn would keep demand for home furnishings humming. But the uncertainty around housing prices has scared away many new home buyers, making for a deeper-than-expected impact on the housing market and beyond. That could complicate China's efforts to manage a slowdown in its economy, which is increasingly geared toward domestic consumption at a time of declining demand from Europe and the U.S.
At a home-furnishings market recently on the eastern outskirts of Beijing, Zhang Shuangxia, a manager of closely held Canaan Furniture Co., sat on a floral couch that has gone unnoticed by her dwindling number of shoppers. "The entire shopping plaza has been empty," Ms. Zhang said.
The drop in customers, which Ms. Zhang estimated at about 50%, reflects the standstill in the housing market, she said. "If they don't buy homes, we don't sell sofas," she said.
Average housing prices in 100 major cities in China fell 0.25% in December compared with November, according to data released on Wednesday by data provider China Real Estate Index System, as the central government continues its campaign to keep housing affordable. In 31 cities across China, developers sold 134 million square meters of residential real estate from January to October of last year, down from 150 million square meters of space in the 2010 period, according to data from Standard Chartered. Sales continued to slide in November.
Consumer spending tied to the housing sector appears to be slipping too. Growth in sales of home appliances in the first 11 months of last year slid to 15% from 24% in the 2010 period, according to National Bureau of Statistics data that have been adjusted to account for inflation. Growth in furniture sales in the period slowed to 26% from 34% in 2010. The growth-rate declines were also felt in the overall retail sector.
At the furniture mart outside of Beijing, Li Wei, the manager of a store called Fashion Furniture, sells home basics such as bookcases and beds but doesn't have extras such as baby cribs and house slippers that have helped a store like IKEA shield its sales from the property slump.
Mr. Li's store had sold much of its wares to customers buying homes in a neighboring suburb called Yanjiao. But Yanjiao's fifth phase of a 50-building development is vastly unoccupied. "Our sales have plummeted," Mr. Li said.
The sluggish property market is causing investor concern about home appliance makers and retailers, said Forrest Chan, an analyst at CCB International (Holdings) Ltd, China Construction Bank's investment arm.
The stock price of Suning Appliance Co. Ltd., a Chinese appliance retailer, has dropped 35% in the past six months. Its rival GOME Electrical Appliances Holding Ltd.'s stock price fell 41% over the period, compared with a 23% drop of the Shanghai Stock Exchange Composite Index.
Suning declined to comment. A spokesman for GOME said demand for appliances is still growing in China's smaller cities, where the retailer is expanding.
Investors have already pulled back from the home-appliance sector, as government subsidies that allowed consumers to trade in their old appliances for new ones at a discount ended at the beginning of 2012, Mr. Chan said.
Some analyst say that the government's restrictions and tightening measures over the past year, such as higher mortgage down payments, to control the property market have led to a healthy price decrease. "If more middle-class Chinese can afford to buy homes, there will be more buyers of washers and refrigerators," said Wei Xiaopo, an analyst at CLSA Asia-Pacific Markets.
But Ma Yanfei, a business director at Boloni Home Décor Co., says he awaits the day people start buying again. Sales contracts are dropping at the private Beijing-based interior-decoration company. New business has dropped 30% from August, with the decline coming largely from markets like Shanghai, Hanghzhou, and Chengdu, where property markets have reacted strongly to government restrictions, Mr. Ma said.
"If it continues, we'll have to lay people off," said Mr. Ma.
Swedish furniture maker IKEA Group says its sales haven't been hurt. IKEA has protected itself from real-estate shifts by marketing itself as the go-to spot for "changes in living situations," such as new babies, house guests and seasonal changes, not just new homes, said IKEA spokeswoman Yvonne Yin.
"We haven't seen sales drop in the markets in China. On the contrary, the growth of IKEA China is positive," she said.