Property | International

China’s home prices rise albeit slowly

Government could take further steps if gains come in too fast

  • Reuters
  • Published: 12:38 January 23, 2013
  • Gulf News

  • Image Credit: Reuters
  • Chinese leaders may grapple with a renewed property frenzy due to expectations of further policy easing and urbanisation.

Beijing:

China’s home prices extended their slow rise in December, the fifth month in the last six to show an increase despite the government efforts to temper prices.

Average home prices in 70 major cities across China rose 0.4 per cent in December from the previous month, after a 0.3 per cent rise in November, according to Reuters’ calculations based on data released by the National Bureau of Statistics. Real estate investment - which accounted for 13.8 per cent of China’s GDP in 2012 — rose 16.2 per cent last year from a year earlier, slowing from an annual increase of 16.7 per cent in January-November.

A modest rise in home prices is thought by analysts to be acceptable to policymakers as it helps underpin a recovery in the world’s second biggest economy, which grew at 7.8 per cent in 2012 - the slowest pace since 1999.

China’s government has spent more than two years implementing policies to rein in speculative real estate activity that has seen prices pushed far beyond the reach of many middle-class citizens, fuelling discontent.

It remains sensitive to the risk of a sudden upward spike and the government has stressed their intention to keep curbs in place, leading analysts to fret about the risk of fresh tightening policies if home prices start to soar.

“I expect there will be a mild increase in home prices in 2013 as the maintenance of home purchase restrictions would limit the room for sharp rise of home prices,” said Shen Jianguang, China economist at Mizuho Securities in Hong Kong. “Home prices still risk a sharp rebound if the current curbing policies continue to reduce house supply.

“If home prices jump again, I think the government will step in and take measures.”

Rebound risks

Rocketing property prices were a major consequence of China’s last economic stimulus effort, the 4 trillion yuan ($635 billion) package launched in 2008 at the depths of the global financial crisis.

A Reuters poll showed in December that economists expected China’s national home prices to rise an annual 7 per cent in 2013 and 5 per cent in 2014.

China’s home prices started to rebound in mid-2012 as the People’s Bank of China began to expand monetary easing as part of Beijing’s growth-supporting policies.

Home prices rose month-on-month in 54 of 70 major cities monitored by the NBS in December, up from 53 in November, confirming expectations that the property market is rebounding.

The NBS also said new home prices in Beijing rose 1.6 per cent in December from a year earlier, compared with November’s year-on-year increase of 0.7 per cent. Shanghai’s prices were flat in December on a year ago, versus a 0.8 per cent annual fall in November.

Property sales rose 10 per cent in 2012 compared with a year earlier, translating into a year-on-year increase of 8.5 per cent in December alone.

Compared with a year ago, however, home prices are still falling nationwide. The 0.04 percent drop in December was the tenth such decline but easing from a year-on-year fall of 0.7 per cent in November,according to Reuters calculations.