China’s average home price rises for 33rd month, defying bank regulator’s warning of ‘grey rhino’ spillover risks

China’s residential property market rose for the 33rd straight month in November, prompting the government to continue its drumbeat of market-cooling measures to stave off the kind of risk that led to the 2008 subprime lending crisis in the United States.

November’s average home price across 70 cities rose 4 per cent from a year ago, even if the growth pace was the slowest in six months, according to data by the National Bureau of Statistics. The average price rose 4.3 per cent in October from a year ago.

Still, there were “growing signs of a buying spree in either new homes or pre-owned [property] in major cities like Shanghai,” said Song Yulin, a senior manager with the city’s property agency Baonuo. “Local authorities are set to step in to stabilise the market if a wild price gain in home prices occurs.”

The real estate sector has been one of the major driving forces of China’s economy as it creates tens of millions of jobs, generates trillions of yuan in taxes, stamp duties and land sale revenue for local authorities across the nation. At the same time however, housing affordability – especially the entry-level homes for first-home buyers and young couples on the first rung of the property ladder – is a hot-button issue for the ruling Communist Party, whose political contract with the population requires it to prevent home prices from soaring out of reach.

Wary of using blunt instruments like the central bank’s key interest rate, local authorities are resorting to administrative measures to keep a lid on home prices. Shanghai residents, who are allowed no more than two homes for each household, must put down at least 70 per cent of the value of their second property as down payment, double the minimum payment for first-home buyers.