Bloomberg News

China Property Stocks Surge as Wuhu Eases Curbs: Shanghai Mover

February 12, 2012

Feb. 10 (Bloomberg) -- China’s property stocks rose as the eastern city of Wuhu became the first to ease housing curbs this year, signaling similar moves by other local governments even as Premier Wen Jiabao reiterated plans to maintain restrictions.

The mid-sized city in Anhui province will offer subsidies of 50 yuan ($7.90) a square meter (10.76 square feet) for the purchase of homes between 70 square meters and 90 square meters, and 150 yuan a square meter for new homes smaller than 70 square meters, the Wuhu government said in a statement on its website yesterday. The city will also waive a deed tax, it said.

More local governments may ease their property measures as home prices fall, according to UBS AG and China International Capital Corp. Wen reiterated on Jan. 31 that China will maintain real-estate market curbs to bring prices down to a reasonable level. Beijing and Shanghai are among cities that said they will continue to impose restrictions this year.

“This might encourage more third-tier cities to follow Wuhu’s example of announcing new policies supporting end-users’ purchase of property,” Eva Lee, an analyst at UBS AG, said in a report sent to investors today. “It should strengthen local buyer sentiment given the more supportive policies in addition to marginally relaxed loan credit.”

A measure tracking property stocks on the Shanghai Composite Index surged 3 percent to the highest since Nov. 15 at the close, the biggest gain among five industry groups on the benchmark gauge. China Vanke Co., the nation’s biggest listed developer, climbed 2 percent in Shenzhen trading and Poly Real Estate Group Co. advanced 3.3 percent in Shanghai.

More to Follow

Chinese developers listed in Hong Kong also rallied. Evergrande Real Estate Group Ltd. increased 3 percent to a five- month high at the close in Hong Kong, Shimao Property Holdings Ltd. gained 1.9 percent, and Greentown China Holdings Ltd. advanced 4 percent.

“Local governments, especially those third-tier cities, rely largely on the property sector for economic growth; they are facing a lot of pressure now,” said Peter Bai, a Beijing- based property analyst at China International Capital. “More cities will follow suit this year.”

In October, Foshan in southern China’s Guangdong province suspended a decision to ease limits on property purchases less than a day after it said it would allow residents to buy a second home.

UBS, which said Shimao and Evergrande are among developers with projects in Wuhu, said the “key risk” is the reversal of the latest policy changes in the city.

Less Sensitive

It is less “sensitive” for cities not well-known outside China to become the first to start easing property curbs, said CICC’s Bai. Wuhu is home to Chery Automobile Co., the country’s sixth-largest automaker.

The central bank this week pledged support for first-home buyers as a crackdown on property speculation threatens to trigger a slump in the real estate market.

China’s home prices fell for a fifth month in January, the longest losing streak since SouFun Holdings Ltd., the country’s biggest real estate website, started tracking the data on July 2010.

A deed tax usually is 1 percent to 2 percent of the value of a home, according to CIMB-GK Securities Research. On a 90- square-meter apartment, the government’s subsidy amounts to an additional 4,500 yuan.

“Policy relaxation from local governments came faster than expected and the next step for them is to ease the implementation of home purchase restrictions,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research, in a note to clients yesterday.

--Bonnie Cao, with assistance from Weiyi Lim in Singapore. Editors: Andreea Papuc, Linus Chua

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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