New home prices defy curbs

China Daily, July 2, 2013

Construction workers at a housing project site in Chongqing. Home prices saw their 13th consecutive increase in June, with the national average rising to 10,258 yuan ($1,673) per square meter.

Construction workers at a housing project site in Chongqing. Home prices saw their 13th consecutive increase in June, with the national average rising to 10,258 yuan ($1,673) per square meter. [China Daily]

Driven by robust home demand in major cities, China's new home prices jumped for the 13th consecutive month in June, defying the government's tightened property curbs.

According to the China Index Academy, a Beijing-based real estate research body, the average price in 100 Chinese cities posted a 0.77 percent rise from May, to 10,258 yuan ($1,673) per square meter.

The gain in June was 0.04 percentage point lower than in May, the report said.

The city of Changshu in eastern Jiangsu province had the biggest gain last month compared with May, with prices up 3.6 percent.

Prices in the top 10 cities rose 1.01 percent month-on-month and 9.93 percent year-on-year. Guangzhou saw the largest rise among the 10 cities, with a 2.74 percent increase from the previous month.

Home values in Beijing jumped 1.6 percent from the previous month, while those in Shanghai increased 0.6 percent.

"Since the government began to impose house purchase limits in 2010, demand has been constrained. Now, the surge is the result of the continuous unleashing of repressed demand," said Zhang Huifang, a professor at Ningbo University who specializes in property economics.

He Tian, the head of research at the China Index Academy, said robust housing demand was reflected in strong home sales in recent months. Figures from the National Bureau of Statistics show that from January to May, new home sales surged 35.6 percent year-on-year.

Figures from the academy indicate that first-half home sales soared more than 40 percent.

The land market in China is also hot, a situation that is expected to add upward pressure on home prices.

According to real estate service provider Centaline Group, land transfer fees in the country's four major cities (Beijing, Shanghai, Guangzhou and Shenzhen) in the first five months of this year were 141.18 billion yuan, up 350 percent year-on-year.

Soaring sales and improved cash flow boosted developers' confidence in the market, which is the reason behind their increasing willingness to enlarge their land banks by paying higher prices.

In addition, brisk sales in first- and second-tier cities have consumed developers' inventory quickly, and developers are eager to beef up their land banks in these cities, He said.

This is clearly seen in Beijing's property market. In the past few months, Beijing developers' inventory has declined fast from the peak of 11 million sq m to about 8 million sq m, which is forecast to be sold in seven to eight months, compared with more than 10 months in other first- and second-tier cities.

"From the inventory perspective, the upward pressure on Beijing's housing prices is even more acute than in Shanghai and Shenzhen," He said.

A separate report by the academy said in Beijing the toughest restrictions have only been effective on slashing housing turnover. Both in April 2010 and February 2011, when the Beijing government rolled out tough measures to curb home buying, turnover fell more than 60 percent.

But those declines failed to dampen prices. As turnover recovered, prices stopped stalling and began rebounding gradually.

The fundamental solution, the report said, is to increase the land supply, either by streamlining developers' procedures for acquiring land or boosting the supply of government-subsidized affordable houses.

But nationally there are also downside factors, market observers said, including the growing new housing construction speed and the central government's continuous tightening of credit supply in the coming months.