China home prices rise

China’s new-home prices rose last month in all 70 cities monitored by policymakers, challenging the government’s efforts this year to control property prices.

Prices in Beijing rose by 1.9 per cent from a year ago, while those in Shanghai, the nation’s financial centre, increased by 2.8 per cent, the statistics bureau said on its website yesterday.

China’s measures to control its property market are at a critical stage and the nation needs to focus efforts on curbing price increases in less affluent cities, Premier Wen Jiabao said on Sept 1. The government said in July that it will rein in residential prices in smaller cities after it raised down-payment requirements and mortgage rates earlier this year.

“Asset prices in China’s second- and third-tier cities are still rising rapidly, as local governments are reluctant to place more strict policies,” said Mr Liu Li Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group. “Especially some western and central cities are facing big pressure to pay out debts, while their main revenue comes from land sales.”

The central city of Nanchang posted the biggest increase among the 70 cities, climbing 9.1 per cent, the statistics bureau’s data for year-on-year showed. Prices in the western city of Urumqi rose 8.8 per cent, the second-biggest gain.

Only two cities responded to the government’s July call for added restrictions on housing purchase, compared with the 40 metropolitan areas, including Beijing and Guangzhou, that tightened rules earlier in the year.

Property prices are too high according to 75.6 per cent of respondents to a central bank survey on Sept 15, the highest level since real-estate data was included in the quarterly poll in 2009. The proportion of households that plan to buy property next quarter dropped 0.4 percentage point to 14.2 per cent, the survey showed.

Prices in Beijing, Shanghai and 29 of 68 other cities monitored by the government were unchanged from July, the statistics bureau said.

“It’s hard to tell where the turning point of China’s housing prices is as the country is so big,” Mr Yao Wei, a Hong Kong-based economist with Societe Generale SA, said ahead of the release today. “For sure home prices will fall first in cities that imposed the strictest measures.”

Existing home prices in Beijing last month rose by 1.9 per cent from a year earlier, while prices in Shanghai rose by 3.7 per cent, according to the statistics bureau. Property companies reported mixed results last month. Country Garden Holdings Co said its August sales hit a record at 5.9 billion yuan, while China Vanke Co, the nation’s biggest developer, said sales dropped 13 per cent from a year earlier.

There are no signs of a significant sales slowdown this month as most developers said their sales-to-date are on track with more new projects, according to a Sept 14 Deutsche Bank report led by analysts.

China’s property prices may retreat in the next 12 to 18 months as banks curb loans to developers, Hong Kong developer Vincent Lo said earlier this month in an interview.

Some cities which posted rapid gains in home prices are facing pressure to bring them down, according to Societe Generale, though it’s unlikely the government will issue more nationwide property policies.

“China’s property policies are in a ‘dead lock’ right now,” Yao said. “Many local governments have complained that they didn’t want more curbs.”

Source :  Today – 19 Sep 2011