Home prices in key Chinese cities to keep rising this year

Amid the slowdown, analysts see new measures to cool mainland property market as unlikely

PUBLISHED : Monday, 05 August, 2013, 12:00am
UPDATED : Monday, 05 August, 2013, 3:52am

With the central government emphasising its desire to see stable growth in the second half of this year, analysts have almost ruled out the possibility of further tightening measures in the property market, leaving room for a rise in home prices in major cities.

On this view the hopes for an easing in existing tightening measures remain dim, but after its recent meeting the Politburo hinted that stricter measures to rein in the property market would be unlikely in the second half of this year, Orient Securities analyst Yang Guohua said in a report.

The new leaders did not mention "austerity measures" at the Politburo meeting last week, showing a change in the government's tone toward the property market, Yang wrote in his report.

He also noted that the minutes of the meeting, which was chaired by President Xi Jinping, recorded that the government would promote healthy and steady development of the property market.

Since taking office in March this year, Premier Li Keqiang had reiterated a number of times that the government would stick to its tightening measures.

But analysts said the economic slowdown had triggered a change in the government's stance.

"If the government's priority is to maintain stable economic growth, there is no room for it to tighten property curbs," said Thomas Lam, head of research and consultancy for Greater China at real estate brokerage Knight Frank.

The property sector was one of the pillars of the mainland's economy, especially important when other pillars, such as exports and domestic consumption, remained weak, he said.

In first-tier cities, land revenues account for about 30 per cent of fiscal income, Lam said. A further crackdown on the property market amid rising concerns over local government debt would raise risk levels for the financial system.

Zhang Xu, an analyst with Beijing-based real estate brokerage Homelink, agreed that the government would need to keep its property curbs unchanged.

Existing measures, such as purchase limits and tightened mortgage loans announced in March by the State Council, were already "quite tough" she said, and stricter new measures were not needed.

According to the China Real Estate Index System, an affiliate of online property news agency SouFun, new home prices in Beijing rose 19.64 per cent in July from a year ago to 28,478 yuan (HK$35,728) per square metre, while second-hand home prices rose 24.34 per cent to 39,617 per square metre.

In Guangzhou, new home prices rose 22.56 per cent to 16,866 yuan per square metre in July from a year ago, while growth was 16.25 per cent in Shenzhen.

"Ri guang pan", which in Putonghua means a property project that sold out in one day, has become a popular topic at dinner tables in Beijing lately.

A total of 1,462 units of Metro Harbour, a new residential project in Daxing district in a suburb of Beijing, were sold out in one day when it launched in July, generating revenues for the developer of 3.79 billion yuan.

Similar ri guang pan were found in other suburban areas in Beijing, as well as Guangzhou and Nanjing.

Zhang said the frenzied demand for new projects in Beijing was stirred by a supply shortage.

"Expectations of an upward trend in home prices have taken hold among buyers. They are keen to cash-in on new homes although the prices are already at high levels," she said, noting home prices were unlikely to drop until the end of this year, although the rise would not be substantial.

Zhang Hongwei, research head of property consultancy Tospur, said home prices would continue to climb against a backdrop of rising land prices. Land resources in core areas of major cities were rare, so property developers were willing to offer higher prices, he added.

Since buyers judge it unlikely the government will further tighten austerity measures unless home prices see stunning growth, the property market would get a fresh boost in the next two months during the traditional peak season for home sales, he said.

Lam said home prices in major cities such as Beijing, Shanghai and Guangzhou would keep rising and he expected 15 per cent growth for the year.

"In core areas of major cities, we still expect strong growth until the end of this year," he said.