Property prices in China grew at the fastest pace in nearly five years in March, official figures issued Wednesday show, as the nation's top leaders repeated their pledges to rein in real-estate speculation and curb runaway prices.
The real-estate sector has become an increasingly important driver of China's economy as the government seeks to promote home ownership. But surging prices in major cities threaten to make property unaffordable for many, and Beijing has for several months sought to contain prices and ward off an asset bubble. Analysts said Wednesday the measures taken so far appear to be insufficient at controlling housing prices, which are still rising sharply in some cities.
The national property-price index rose 11.7% in March from a year earlier, accelerating from February's 10.7% rise, the National Bureau of Statistics said. The increase was the largest since July 2005, when the bureau switched to an index based on data in 70 cities rather than 35. The nation's top leadership flagged the problem in a separate statement issued hours later on Wednesday.
"A number of factors driving up prices are appearing, strengthening expectations of inflation. The problem of excessive increases in housing prices in some cities is particularly acute," the State Council said in a statement issued after its quarterly meeting on the economy chaired by Premier Wen Jiabao. While China's economic recovery has been further consolidated in recent months, there are still prominent problems and risks to deal with, it said.
The fastest housing-price increases in March were in the southern island province of Hainan, a popular tourist destination. Prices in the provincial capital Haikou rose an average 64.8% from a year earlier, while those in the resort city of Sanya jumped 57.5% during the period. Prices in Guangzhou, the capital of the southern province of Guangdong, rose 20.3%.
March was the 10th straight month in which urban property prices increased from a year earlier, with home buyers in China still stubbornly bullish about the property market. The volume of property sales was up 35.8% from a year earlier in the first quarter, to 153.6 million square meters, slowing from last year's 42.1% gain but still quite rapid.
The State Council said it will "resolutely curb" excessive property price rises by restricting speculative purchases while increasing the supply of land for housing and the government supports for low-income housing. In a separate statement, the Ministry of Housing and Urban-Rural Development said it will build 3 million low-cost homes in cities this year, and another 2.8 million units in rural areas.
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The official statements didn't announce any specific new policies, which analysts increasingly think are necessary given the strong momentum in the property market. "The latest data suggest...that further measures are necessary to bolster the market cooling efforts," said Kun Liu, an analyst from Great Wall Securities.
The State Council statement did call for "speeding up research and drafting of tax policies to appropriately guide individual home purchases," in what may be a reference to the widely discussed possibility of a new property tax. China taxes property transactions but doesn't levy an annual assessment on property owners, as many other economies do.
"Home buyers' sensitivity to policy measures could be more acute if credit tightening measures specific to the real-estate industry combine with an expected hike in interest rates," said Johnson Hu, an analyst from UOB KayHian.
Property developers are still active. New construction was up 60.8% from a year earlier in the first quarter, the statistics bureau said, while investment in real-estate development rose 35.1% from a year earlier in the first quarter.
The government began late last year to tighten lending for property purchases and regulations on land sales, and in March ordered 78 state-owned enterprises to exit their real-estate sidelines, whose rapid expansion had become a focus of public concern.
