Bloomberg News

China Home Prices Gain in Half the Cities as Market Steadies

November 18, 2012

China Home Prices Gain in Half Cities Tracked as Market Steadies

New home prices in Beijing climbed 0.2 percent in October from the previous month. Photographer: Nelson Ching/Bloomberg

China’s new home prices rose in October in more cities than the previous month, indicating the government will refrain from relaxing curbs on the property market.

Prices climbed in 35 of the 70 cities the government tracks, compared with 31 in September, according to data from the statistics bureau yesterday. Prices fell in 17 cities.

Investors are gauging the government’s policy direction on real estate, rolled out over two years to rein in surging home prices that raised concerns about affordability, after the Communist Party unveiled the new generation of leaders last week. The measures have had a “relatively good” effect and the government will “steadfastly” enforce property controls, Housing Minister Jiang Weixin said in Beijing last week.

“The government has sent out signals that they will not loosen property policies because they don’t want to see a big price rebound,” said Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. “At the National People’s Congress next March, it probably could claim victory for controlling property prices.” Delegates and officials gather every March for the annual meeting of the National People’s Congress, the highest governmental body.

Maintaining Curbs

The northwestern city of Urumqi led gains in October, with a 0.5 percent increase from September, according to the data. Among major cities, the southern business hubs of Guangzhou and Shenzhen recorded gains of 0.4 percent each. Beijing prices rose 0.2 percent, while those in Shanghai and 17 other cities were unchanged.

A gauge tracking property shares on the Shanghai Composite Index (SHCOMP) fell 1 percent, to the lowest in three weeks and the most among the five industry groups on the benchmark, as of 9:58 a.m.

The government wants to maintain the curbs because steady sales and mild price growth are the “exact situation” it wants to see, while further tightening will damp a tentative recovery in the Chinese economy, Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd., said before the data.

China’s gross domestic product slowed to 7.4 percent in the third quarter from a year earlier, the weakest in three years, while gauges of manufacturing and retail sales have pointed to a recovery.

With the economy bottoming, home prices won’t have a “bad performance” next year, said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd. (ANZ)

Existing Homes

Home prices rose in 12 cities from a year earlier, the same as in September, the data showed.

“With prices rising or unchanged in the majority of the cities, the downward trend in China’s home prices has been restrained,” said ANZ’s Liu. “Buyers are now holding a wait- and-see position for the policy direction after the new generation of leadership came out.”

Existing home prices were unchanged in Beijing last month from September and increased by 0.2 percent in Shanghai.

Real estate prices in China rose 160 percent in the 1998- 2011 period after the country privatized the property market, according to government data.

In its more than two-year effort to curb the property market, the central government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, increased building of low-cost social housing, and placed home-purchase restrictions in about 40 cities.

Property Tax

Many Chinese cities are preparing to introduce property tax trials, China Securities Journal reported on Nov. 16, citing unidentified people. The central government hasn’t yet decided on their scale and timing, it said.

“Given the strength of the rest of the economic data, we don’t think the government is likely to provide stimulus to the housing sector,” said Michael Klibaner, head of China research at Jones Lang LaSalle Inc., in an interview in Shanghai. “If there’s concern about the economy, we would expect it to support the first-time home buyers through mortgages and the public housing fund.”

Private data also has shown the housing market is stabilizing. Home prices gained 0.17 percent in October, advancing for a fifth month, according to SouFun Holdings Ltd. (SFUN:US), the nation’s biggest real estate website owner.

Developers’ Sales

Contracted sales at 11 major developers were 57.3 billion yuan ($9.2 billion) in October, up 24 percent from September and 41 percent from a year earlier, according to Ryan Li, an analyst at JPMorgan Chase & Co. in Hong Kong. It was the best month since developers started releasing monthly data in January 2009.

China’s housing sales climbed 6.6 percent to 3.88 trillion yuan in the first 10 months, while investment in homes, office buildings, malls and other real estate gained 15.4 percent to 5.76 trillion yuan, National Bureau of Statistics’ data showed.

The ministry is on “high alert” if transaction volume and home prices increase “substantially,” and is “actively” studying expanding a property tax trial, Xinhua News Agency reported on Nov. 13, citing Jiang, the housing minister.

There will not be “meaningful increase” in housing prices this year, and the risk of prices rising by more than 5 percent is “very small”, according to Klibaner.

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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