China's housing price inflation likely to ease in 2014, analysts say

Greater supply on mainland and more controls, including extension of property tax to curb speculation, should slow pace of rise in values

PUBLISHED : Wednesday, 06 November, 2013, 5:10am
UPDATED : Wednesday, 06 November, 2013, 5:10am

Housing inflation on the mainland is likely to ease next year as supply increases and more policy measures are implemented, after prices soared out of the authorities' comfort zone this year.

Some cities, including Beijing and Shenzhen, have stepped up efforts to cool their real estate markets in recent weeks, and the country's top leaders are expected to map out a long-term blueprint to take the frothy market to a soft landing during a crucial meeting that starts on Saturday. They will probably also announce a widening of a property tax scheme to curb speculators.

Shenzhen raised deposits on second-home purchases to 70 per cent last Friday, from 60 per cent previously. And last month Beijing announced its plan to increase land supply for the construction of 70,000 apartments for end-users in the next two years at a 30 per cent price discount compared with neighbouring projects.

"With projects built on land sold in the second half of this year coming onto the market next year, and possible relaxations of approvals for pre-sale licences, home supply in key cities will increase significantly and the momentum for home price surges will then ease fundamentally," said China Real Estate Information Corporation, a leading property data provider and website operator, in its latest report.

The average home price in the top 100 cities rose 10.69 per cent in October from a year earlier, against a 9.48 per cent increase in September, according to data from China Index Academy, the mainland's largest private real estate researcher.

That was confirmed by another set of private data from the China Real Estate Information Corporation, which said annual housing inflation in 288 major cities hit 10.5 per cent in October.

In month-on-month terms, the average price in 100 of those cities rose 1.24 per cent in October, its 17th consecutive monthly rise, and quickening from a rise of 1.07 per cent in September. However, the government-backed Beijing Real Estate Association said home prices in the capital fell 6.3 per cent in October from a year earlier and 4.5 per cent from September.

Market watchers now expect the new government, led by President Xi Jinping and Premier Li Keqiang, will gently squeeze the property bubble by increasing supply of homes, instead of curbing demand.

Xi pledged last week to increase the supply of land for homes and spend more on projects providing affordable housing.

"They [the new leaders] belong to the supply school," said Chen Sheng, dean of the China Real Estate Data Research Academy, a government think tank in Beijing.