Surging Prices in Chinese Real Estate Slowing

The Chinese government has been imposing residential real estate purchase restrictions in the country’s largest cities with hopes of dampening price inflation, and a slight drop in prices …

The Chinese government has been imposing residential real estate purchase restrictions in the country’s largest cities with hopes of dampening price inflation, and a slight drop in prices for July indicate it may be working. China’s expanding economy has been fueling a housing boom and prices have been rising across the nation, and the government was moved to action when developers posted a 31% increase in gains in the first half of the year. The slight drop in July increases, as opposed to an actual month-over-month drop, seen in cities like Shanghai and Beijing is encouraging policy makers to expand the practice to other areas. For more on this continue reading the following article from PropertyWire.

Measures aimed at cooling China’s residential real estate market seem to be working as property prices increased at their slowest pace for 11 months in July after the government expanded efforts to curb the risk of an asset bubble.

According to SouFun Holdings prices rose 0.2% in July from June, the slowest since August last year. Residential prices increased in 66 out of 100 cities tracked by the nation’s biggest real state website owner, with average home values nationwide climbing to 8,874 yuan ($1,378) a square meter.

China’s cabinet said last month it will expand measures to rein in residential prices to smaller cities after limiting home purchases in metropolitan areas including Beijing and Shanghai. The government is intensifying real estate restrictions nationwide after developers posted gains in first half sales and housing transactions climbed 31% in June, even as down payments on some mortgages were increased this year.

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‘China’s property market is cooling down gradually, but it’s still not obvious. This is a matter of time. With high inflation and investment, it’s unlikely home prices will drop soon,’ said Peter Bai Hongwei, a Beijing based property analyst at China International Capital, the country’s biggest investment bank.

Home prices in July rose 6.8% from a year ago. The central Chinese city of Yichang saw the biggest monthly price gain at 1.9% gain from June, while the eastern city of Suqian posted the largest decline of 2% among the 100 cities surveyed, SouFun said. Home prices in Shanghai rose 0.4% and Beijing saw them rise by 0.1% month on month.

New home prices in Beijing fell to the lowest last month since April 2010, when the government introduced the first round of measures to crack down on the market, China Securities Journal reported, citing the local property transaction bureau, which uses a different statistics system to SouFun.
 
China’s consumer price index hit a three year high in June while investment in real estate rose 33% to 2.6 trillion yuan in the first six months from a year earlier, according to the national statistics bureau.
 
Nationwide purchase restrictions may damp local economies, according to Liu Li-Gang, a Hong Kong based economist at Australia & New Zealand Banking Group Ltd. ‘The one size fits all rule may not have as good an effect as expected because local governments still highly rely on land sales for revenue,’ Liu said.

Authorities in Shanghai, China’s financial centre, are to step up inspections on the pricing of new homes to ensure that they aren’t set at unreasonably high prices, in response to the central government’s order.
 
Some experts think the bubble will burst. ‘The property market in China is headed for a big bust,’ said Puru Saxena, chief executive officer of Puru Saxena Wealth Management in Hong Kong.

‘I suspect that over the next 18 months to two years, we’ll see a significant decline in Chinese real estate prices,’ he added.

This article was republished with permission from PropertyWire.

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