Home prices cool as policies bite

PUBLISHED : Saturday, 02 April, 2011, 12:00am
UPDATED : Saturday, 02 April, 2011, 12:00am


Home prices on the mainland are showing signs of stabilising in reaction to a series of central government measures to cool off the property sector.

The average price in 100 cities rose just 0.59 per cent month-on-month to 8,738 yuan (HK$10,364) per square metre, according to a survey conducted by mainland property website Soufun.com.cn.

Sixteen of the 100 cities reported a slight decline and two were unchanged. Home values in 82 cities increased, but 74 of them grew by less than 1 per cent.

Shanghai is one of the 10 major big cities that showed a slight fall in prices, with a month-on-month fall of 0.02 per cent, said Soufun. The average price of 10 major cities, including Beijing, Guangzhou, Shenzhen and Nanjing, rose 0.29 per cent to 15,782 yuan per square metre.

Given the prevailing macroeconomic control policies, international property consultant DTZ said residential sales were expected to be slow throughout the first half of this year - until a wave of small-to-medium-sized flats at more affordable prices came on stream by July or August.

David Ng, the head of regional property research at the Royal Bank of Scotland in Hong Kong, said he believed the worst was over in terms of government measures to crack down on the sector.

'Limit-purchase policies have slowed sales and weakened sentiment, but have not initiated price correction,' Ng said in his latest research report.

He said authorities now regarded moderate price increases as acceptable. The only remaining limitations were tighter access to mortgages and the limits on the number of home purchases, he said.

Beijing unveiled a package of eight-point austerity measures in late January, to put the brakes on the sector.

For the first time, local governments are required to set their own target for their city's average home price, which will be one of the measures of their performance.

Following the government's lead, DTZ said 35 major cities had now moved to restrict owners from buying more than two flats, across the nation. The January measures also required cities to establish and announce new house price control targets in the first quarter of the year.

Few cities had announced the target just before the deadline.

The governments of Shanghai and Shenzhen announced that house price rises in the two cities this year must not exceed the targets of 8 per cent and 10 per cent, respectively. Beijing municipal government has predicted that its housing prices would fall slightly this year.

Guangzhou said any price increase in newly built homes would not be higher than the growth of the city's gross domestic product, and would not outstrip the rise in residents' income.