Mainland home prices climb 2.8pc, fastest pace in a year

PUBLISHED : Friday, 16 October, 2009, 12:00am
UPDATED : Friday, 16 October, 2009, 12:00am

Mainland home prices last month rose at their fastest pace in a year, while investment in property also gained, spurred by record lending and stimulus spending.

Housing prices in 70 of the mainland's large and medium-sized cities rose 2.8 per cent year on year, building on the 2 per cent growth in August, according to the National Bureau of Statistics.

It was the fourth consecutive increase after seven months of declines, providing further evidence of a sustained improvement in the real estate sector.

Prices grew 0.7 per cent on the month, building on a 0.9 per cent gain in August, the bureau said.

Tom Orlik, a China economist with Stone & McCarthy Research Associates, said the rise would be a further incentive to investors in the real estate sector.

The government sees a booming property market as crucial to its efforts to promote private consumption amid a slump in external demand because of the global economic downturn.

The biggest price increases last month were for flats of 90 square metres or less, whose prices rose 4.9 per cent on average from a year earlier.

The second-tier coastal cities of Hangzhou and Ningbo had the largest gains of the 70 cities, with average prices up 4.9 per cent. Prices in the northern city of Tianjin rose 4.5 per cent.

Prices of new homes increased 2.7 per cent from last year and 0.8 per cent from August.

New home prices in Guangzhou and Yinchuan rose 7.3 per cent and in Kunming 6.1 per cent year on year.

The price of second-hand homes in the 70 cities rose 3.8 per cent from a year earlier and 0.5 per cent from August.

In the second-hand market, Shenzhen led the gains with prices rising 16.6 per cent year on year. This was followed by the eastern cities of Wenzhou and Hangzhou, up 11.2 per cent and 10 per cent respectively.

Shijiazhuang, in Hebei province in the north, led the decline in the secondary market, dropping 7.2 per cent year on year, followed by the northeastern city of Jilin, which saw prices falling 5.6 per cent.

Meanwhile, capital investment in property development, one of the main forms of private investment on the mainland, gained 17.7 per cent in the January-September period from a year earlier, picking up from growth of 14.7 per cent in January to August.

Economists say the increase may help sustain economic growth on the mainland, even after the impact of the government's stimulus programme starts to taper off.

'Higher levels of real estate investment will help rebalance the investment-led stimulus away from public infrastructure projects and towards more private sector-led developments,' Orlik said.

Nationwide property sales in the first nine months, including in smaller cities and rural areas, surged 73.4 per cent from a year earlier to 2.75 trillion yuan (HK$3.12 trillion), the bureau said. In terms of floor area, nationwide sales jumped 44.8 per cent to 583.71 million sqmetres.

New construction from January to September fell 0.4 per cent to 732 million sqmetres, against a 5.9 per cent fall in the January-August period, the bureau said.

Property accounts for more than 20 per cent of total fixed-asset investment on the mainland, which is one of a trio of engines fuelling growth for the world's fastest-expanding major economy. The other two are exports and domestic consumption.

The authorities are counting on increased private-sector capital spending to take the baton of growth from government-driven investment. The government unveiled a four trillion yuan stimulus package in response to the global financial crisis last year. Beijing hoped massive capital spending and other initiatives to promote domestic consumption would help spur growth to offset a collapse in exports.

The statistics agency is due to release third-quarter gross domestic product data on October 22. The mainland economy grew 7.1 per cent in the first half after rebounding 7.9 per cent in the second quarter from 6.1 per cent in the first.