(Updates with closing price in sixth paragraph.)
June 1 (Bloomberg) -- China’s home prices rose for the ninth straight month in May as smaller cities withstood government efforts to curb risks of asset bubbles, according to SouFun Holdings Ltd.
Home prices gained 0.5 percent in May from April, the nation’s biggest real-estate website owner said in an e-mailed statement today. Residential prices increased in 76 out of 100 cities tracked by SouFun, with average home values nationwide climbing to 8,819 yuan ($1,361) a square meter (10.76 square feet).
The government said last month it will maintain property curbs after it raised the minimum down payment for second-home purchases this year and introduced residential property taxes in Shanghai and Chongqing. The central bank has raised interest rates four times and increased banks’ reserve requirements eight times since October.
“Home-price growth remained at a steady pace and was higher than we expected,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research Pte. “Hot money went to the periphery of big cities, where policies are not so strict. Prices there will hold up pretty well this year.”
Urumqi, capital of China’s far western Xinjiang province, posted a 3 percent gain from April, the biggest advance, while values in the mid-sized eastern city of Dezhou fell 1.6 percent, the sharpest decline among the 100 cities surveyed, Soufun said. Home prices in Shanghai rose 0.3 percent and gained 0.2 percent in Beijing last month.
A gauge tracking property shares on the Shanghai Composite Index gained 0.2 percent at the 3 p.m. close, rising for a second day.
There are signs the government’s policies are taking effect, according to Jones Lang LaSalle Inc. The percentage of investors in primary sales is at an all-time low, while home prices are advancing at a slower pace than income growth, the Chicago-based property brokerage and consulting company said.
“Some aspects of the policies are working, at least from the government’s perspective,” said Michael Klibaner, Shanghai- based head of China research at Jones Lang LaSalle. “But you are still bottling up the pressures from the market, and prices will go back again quickly if you remove the restrictions.”
A property tax may be expanded nationwide after the government revises a trial program in Chongqing and Shanghai, Xinhua News Agency reported on May 29, citing Chongqing Mayor Huang Qifan.
The government is “very serious” about lowering home prices this time, Richard Koo, chief economist at Nomura Research Institute, said in a Bloomberg Television interview on May 26. “To that extent, we may see bankruptcies or collapses of projects as a result,” he said.
Premier Wen Jiabao reiterated May 1 that the nation is “determined” to bring down housing prices in some cities to a “reasonable” level.
Big developers may be able to withstand a decline in volumes for some time because they can raise money through the bond markets or borrow offshore, CIMB-GK’s Hu said.
April new home prices rose in all but three of 70 Chinese cities monitored by the government. The government’s indexes of new and existing homes for May are due on June 18.
--Bonnie Cao. Editors: Andreea Papuc, Malcolm Scott
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