China’s March new home prices posted the biggest gain in more than two years as buyers rushed into the market ahead of property curbs by local governments, driving real estate stocks higher.
Prices climbed for the 10th month, rising 1.1 percent to 9,998 yuan ($1,610) per square meter (10.76 square feet) from February, SouFun Holdings Ltd. (SFUN:US), the country’s biggest real estate website owner, said in a statement today after a survey of 100 cities. That’s the biggest increase since January 2011.
“The earlier property policy uncertainty drove quite a lot of buyers into the market, while supply, usually low in the first quarter, couldn’t catch up with the demand,” said Zhao Zhenyi, a Shanghai-based property analyst at Industrial Securities Co. “Home sales will weaken in the coming months as more local governments announce curbs for the cities.”
About 17 cities have issued details of property curbs by the end of the first quarter. The capital city of Beijing banned single-person households from buying more than one residence, while Shanghai prohibited banks from giving credit to third-home buyers, the local governments said over the weekend.
Home prices rose 3.9 percent last month from a year ago, according to the SouFun statement.
A gauge tracking property shares advanced 0.9 percent at the close of trading in Shanghai, the most among five industry groups on the Shanghai Composite Index. (SHCOMP) The benchmark measure fell 0.1 percent.
The measures come a month after former Premier Wen Jiabao ordered the central bank during his last days in office to raise down-payment requirements for second mortgages in cities with excessive cost gains and told local governments with the biggest price pressures to tighten home-purchase limits.
“Property is seen as safe haven against inflation, against all sorts of changes in economic cycle,” Pauline Loong, managing director of Asia-Analytica Research in Hong Kong, said in a Bloomberg Television interview with Rishaad Salamat. “So you have a curb, so the money stops for a while; the minute they see a loophole, the minute they see something, the money goes back in, so the demand is there.”
The southern city of Zhanjiang in Guangdong province had the biggest gain last month from February, with prices increasing 3.7 percent, SouFun said. Home values in the capital Beijing added 2.9 percent, while those in Shanghai, the country’s financial center, jumped 0.5 percent from February.
The measures by local governments were less stringent than investors had expected, which reflect a “tug-of-war between the local and central governments,” Ting Lu, chief economist for Greater China at Bank of America Corp., wrote in a note to clients today.
More than two-thirds of Chinese residents, or 68 percent surveyed, find property prices too high, the most since the final quarter of 2011, the People’s Bank of China said in a quarterly release on March 19. More than a third, or 34.4 percent, said home prices will rise in the coming three months.
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