Property prices up in soaring market

PUBLISHED : Saturday, 20 January, 2007, 12:00am
UPDATED : Saturday, 20 January, 2007, 12:00am

Average increase of 5.4pc seen in big cities last year

Property prices in large cities rose an average of 5.4 per cent year on year last month, 0.2 percentage points faster than in November, in the latest indication of a soaring housing market that only this week prompted the central government to increase developers' tax burden.

National Development and Reform Commission data released yesterday showed new home prices surged 6.3 per cent year on year, up from a 5.8 per cent increase in November, and prices in the secondary market rose 4.2 per cent, one point less than in the previous month.

Non-residential property prices increased 4.6 per cent from a year earlier, up 0.6 percentage points from November.

The economic planning agency uses property prices in 70 large and medium-sized cities to gauge price changes.

Prices in Beijing jumped 10.4 per cent year on year last month, the second fastest growth among the 70 cities in the index. It was the seventh consecutive month that property price rises in the capital had reached double digits.

Qinghuangdao, a port city in Hebei province , led the pack with a blistering year-on-year rise of 11.8 per cent. Elsewhere, property prices in Shenzhen rose 10 per cent last month from a year earlier, the third fastest in large cities, and those in Guangzhou went up 8.3 per cent, the seventh fastest.

'Housing prices in affluent cities will continue to rise because of strong demand among high-income earners,' said Guo Xiaowu , a researcher with the Real Estate Research Institute at Xiamen University.

The central government has issued a slew of measures to rein in the property sector, part of a wider campaign to rein in an investment frenzy that policymakers fear could trigger a destabilising crop of bad loans.

The latest tightening measure came on Tuesday when the tax authorities announced they would enforce a land appreciation tax starting from February 1. The proposed property tax would take up to 60 per cent of the profits developers earn from real estate projects.

Analysts say the tax aims to reduce the attractiveness of property market deals by trimming developers' profit margins. Property stocks on the mainland and in Hong Kong plunged on the news.

However, Mr Guo said the tax would do little to deter developers from investing on the mainland in the long run because most were confident about the potential of the market.