Bloomberg News

China’s June Home Prices Slow in Major Cities, SouFun Says

July 01, 2011

(Updates with closing share prices in seventh paragraph.)

July 1 (Bloomberg) -- China’s June home prices eased in eight of the country’s 10 biggest cities as the government expanded efforts to curb the risk of asset bubbles in its housing market, according to SouFun Holdings Ltd.

Home prices in cities including Beijing and Shanghai either posted slower gains or declines from May, SouFun said in an e- mailed statement today. Hangzhou and Tianjin are the only two among the 10 biggest cities that reported gains following a drop in May, the nation’s largest real-estate website owner said.

The increase in nationwide home prices slowed to 0.4 percent last month from 0.5 percent in May, the 10th straight month of gains, SouFun said, as 75 of 100 cities surveyed reported higher prices. Concerns of tighter credit and further curbs prompted Standard & Poor’s to lower the outlook for Chinese developers to “negative” from “stable” last month.

“Price growth in big cities slowed, but it takes time for a nationwide adjustment,” said Peter Bai Hongwei, a Beijing- based property analyst at China International Capital Corp., the country’s biggest investment bank. “The situation with a shortage in housing supply is just gradually improving.”

Nationwide home prices rose 5.2 percent last month from a year earlier, SouFun said.

More Measures

Average home values nationwide climbed to 8,856 yuan ($1,370) a square meter (10.76 square feet), SouFun said. The government this year raised down-payment and mortgage requirements and imposed purchase restrictions in some cities. The central bank also raised interest rates four times since October, when it increased borrowing costs for the first time in three years.

A gauge tracking property shares on the Shanghai Composite Index rose 0.9 percent to a two-month high at the 3 p.m. close, the biggest gain among five industry groups on the benchmark measure.

Month-on-month gains in Shanghai home prices slowed to 0.1 percent from 0.3 percent in May, while those in Beijing dropped 0.1 percent after rising 0.2 percent in May, according to SouFun. Housing values in Shenzhen, the southern Chinese business center, increased 0.1 percent, easing from the 1.1 percent climb in May, it said.

Nationwide, the central Chinese city of Zhengzhou posted the biggest advance of 2.7 percent from May, while the Sanya tourism resort in the southern Hainan province posted the largest decline of 0.9 percent among the 100 cities surveyed, SouFun said.

Restrictions

Purchase restrictions and tight mortgage supply have muted demand, while transactions showed significant decline in major cities, wrote analysts including David Ng of Royal Bank of Scotland Plc on a note yesterday.

Developers’ sales rose as the strategy for quick sales help offset some of the effects from the government’s tightening, said China Real Estate Information Corp., known as CRIC, in an e-mailed statement today.

China Vanke Co., the country’s biggest developer, sold 64.4 billion yuan of homes in the first half, the most among 30 developers tracked by the research agency. Evergrande Real Estate Group followed with 42.9 billion yuan, CRIC said.

“Home prices will gradually fall this year, as the completion of social housing will dilute the market,” Freddy Lee, chief executive officer of Shui On Land Ltd., said in a June 23 interview in Singapore, who forecast a 5 percent to 10 percent decline in home prices in 2011 as the country plans to build 10 million affordable homes this year.

The government’s indexes of new and existing homes for June are due on July 18.

Nationwide home prices may start to decline in the first half of next year if the government’s policies are prolonged, Bai said.

--Bonnie Cao. Editors: Linus Chua, Chua Kong Ho

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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