China Must Prevent Rebound in Property Prices, Premier Wen Says

Beijing

China must "unswervingly" continue its property controls and not allow prices to rebound, the official Xinhua News Agency cited Premier Wen Jiabao as saying.

The nation must also promote changes to real-estate taxes and set up a long-term policy framework to control the property market, Wen said today when he visited Changzhou city in eastern Jiangsu province, according to the Xinhua report.

Wen's comments underscore the government's determination to maintain curbs on housing purchases even as it cuts interest rates and boosts infrastructure spending to reverse a slowdown in the world's second-biggest economy. China's new-home prices rose for the first time in 10 months in June, according to SouFun Holdings Ltd, which owns the nation's biggest real estate website.

Property controls are at a "critical period" and the task remains "arduous," Wen was cited as saying. Restricting the demand of speculative property investments must be made a long- term policy, he said.

Market expectations about property prices are changing and citizens are worried prices will rebound, he said. Signals in the market are currently "messy" and the country needs to restrict misleading and speculative information, Wen said, according to Xinhua.

The government must "promote the study and implementation of changes to the property-tax mechanism, and to speed up the establishment of a comprehensive long-term mechanism and policy framework for controlling the property market," Xinhua cited the premier as saying.

The People's Bank of China this week cut interest rates for the second time in a month, stepping up efforts to promote growth as fiscal turmoil in Europe crimps exports and property restrictions damp domestic demand. At the same time, the central bank signaled property restrictions won't be relaxed.

"All financial institutions must continue to strictly implement a differentiated housing credit policy to continue curbing property buying for speculation and investment purposes," the central bank said in its interest-rate statement on July 5.

Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, said in a July 5 note that investors or speculators will increasingly re-enter the housing market, pushing up housing prices "meaningfully in the next few months."

"It may trigger the government to implement new measures to curb housing prices around late September or early October, depending on the economy status," he wrote.