Curbs take heat out of China market

Fresh tightening actions succeed in easing pace of month-on-month rises, with more moves expected following plenum's reform thrust

PUBLISHED : Monday, 18 November, 2013, 11:23am
UPDATED : Tuesday, 19 November, 2013, 11:57am

Rising home prices in the mainland's top cities accelerated last month from a year earlier, but the gains were due partly to a low base for comparison last year.

The pace of month-on-month increases eased after fresh tightening measures by local governments.

Data from the National Bureau of Statistics yesterday showed home prices rose 21.4 per cent from a year earlier in Shanghai last month, the most among the 70 major cities monitored by the agency.

Beijing was next with an increase of 21.2 per cent, followed by Guangzhou with 20.7 per cent and Shenzhen, 20.6 per cent. In September, Beijing posted the fastest annual rise among the cities with a gain of 20.6 per cent.

However, the statistics bureau played down the annual increase and stressed the slower pace of month-on-month gains.

Average home prices in the 70 cities rose 0.7 per cent last month from September, down from 0.9 per cent that month, it said.

"October's narrowing monthly home price gain is a result of strengthened control policies in some cities," said Liu Jianwei, a senior statistician at the bureau, after the release of the data.

Liu said that increased home supply from developers in September and October - traditionally a busy season for the market - and local government tightening of pre-sale licences for high-priced projects helped contain the monthly rises.

Beijing, Shanghai and Shenzhen have issued a slew of fresh tightening measures in the past few weeks, stepping up efforts to increase the amount of land for mass-market homes, while raising the deposit for buyers of second homes to 70 per cent from 60 per cent.

"These measures will weigh down market sentiment and have a negative impact on home prices," said Chang Jian, a China economist with Barclays.

Chang expects more tightening measures following the decision of the Communist Party at its third plenum to deepen reforms.

The plenum statement said the rural land market would be liberalised, eventually allowing farmers to sell the land they work and live on. It also pledged to step up efforts on property tax, as part of the party's broad efforts to overhaul the fiscal and tax regime. Following the plenum's lead, Anhui province has announced plans for freer trading of farmland.

Separately, a property tax that has been on trial in Chongqing and Shanghai since 2011 is expected to be extended to more cities soon.

Guangzhou has become the latest mainland city to raise the deposit requirement for second-home purchases to at least 70 per cent. The move is part of a five-point plan announced by the city government yesterday aimed at reining in prices.

Meanwhile, banks have cut mortgage loans as their lending quota fills up. The authorities were likely to maintain tight liquidity next year, which would hurt developers, Chang said.

The People's Bank of China warned about problems in the real estate market and local government debts in its third-quarter monetary report, reaffirming a neutral policy stance. In the year's first three quarters, new loans to the property sector hit 1.9 trillion yuan (HK$2.4 trillion), accounting for 26.1 per cent of total new lending during the period.

Additional reporting by Peggy Sito