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China property-price gains slowed in August to 9.3%
Published on: 2010-09-10
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China’s property prices rose 9.3 percent in August from a year earlier, signaling officials may extend a crackdown on speculators and multiple home purchases.

Average prices in 70 major cities were unchanged from a month earlier. Transactions rose last month, the statistics bureau’s newspaper, China Information News, reported today.

Poly Real Estate Group Co. and Beijing Capital Development Co. led shares of Chinese developers lower on concerns Premier Wen Jiabao’s government will implement further tightening measures to damp asset bubbles in the world’s fastest-growing major economy. Policy makers have already raised mortgage rates and down-payment requirements for second-home purchases.

“There’s concern that the government may take bigger actions against the property market going forward,” said Wang Zheng, chief investment officer at Jingxi Investment Management Co. in Shanghai. “A slowdown in price increases isn’t enough and what they want to see is a price decrease.”

Steps could include stopping loans to real estate developers, compulsory lowering of home prices, and a ban on third-home purchases, the 21st Century Business Herald reported Sept. 8.

Higher Sales

The 9.3 percent increase in August was the slowest pace in eight months and less than the 10.3 percent increase in July and the median 10 percent estimate in a Bloomberg News survey of eight economists.

The value of August sales rose about 15 percent to 353.3 billion yuan ($52.1 billion) from July and the volume increased 6 percent, today’s data showed. China Vanke Co., the nation’s largest listed developer, reported a 149 percent jump in August sales from a year earlier, and Poly Real Estate Group Co., the second largest, said sales almost doubled.

Today’s data “may not be consistent with the latest phenomena of surging home sales and record price for land sales,” which may “rekindle the debate on the quality of housing data,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd.

Data compiled by Soufun.com, the nation’s largest property website, showed housing transactions in Shenzhen surged 84 percent last month from July and rose 23 percent in Beijing. Prices in Beijing gained 12.3 percent in August over the previous month and rose almost 7 percent in Shenzhen, according to Soufun. By contrast, the statistics data today showed new home prices in Beijing stayed unchanged from July and costs in Shenzhen dropped 0.3 percent.

Tug of War

Despite softening price gains compared to 2009, month-on- month figures for prices highlight that challenges remain for policy makers. A 0.1 percent decline in June was the first in 16 months and prices have now stayed unchanged for two months on that basis.

“This is a tug of war between the government and property developers and rebounding transactions may back some developers’ resolve not to cut prices,” said Mizuho’s Shen. “It’s the government’s credibility on the line if property prices fail to drop.”

Ken Peng, a Beijing-based economist at Citigroup Inc. warned this week that the government could restrict pre-sales of apartments, further tighten mortgage rules and consider introducing a property tax.

The government may increase mortgage rates and cash down payments for home purchases and limit individuals to owning only one home if residential prices don’t decline, Jones Lang LaSalle Inc. Chicago-based Chief Executive Officer Colin Dyer said yesterday. A tax on property ownership may be introduced in “two to three years” after study and consultation, he said.

Increasing Supply

By contrast, Jing Ulrich, chairwoman of China equities and commodities at JPMorgan Chase & Co., said Sept. 8 that China doesn’t need additional measures because an increasing supply of affordable housing will damp prices.

Investment in real-estate development rose 34.1 percent to 449 billion yuan in August from a year earlier, the statistics bureau newspaper said today. That compared with 33 percent for July and 36.7 percent gain for the first eight months.

Billionaire Vincent Lo, chairman of Shanghai-based developer Shui On Land Ltd., said on Aug. 19 he expected price cuts to become more common in the second half due to rising supplies of residential properties coming into the market.

A wave of new apartments is due to come onto the market in September and October which will trigger a decline in prices as developers compete to move their inventory, Stephen Green, head of China research at Standard Chartered Plc, said yesterday.

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