China to Curb Home Prices in Small Cities, Wen Writes

(Corrects to say SouFun’s home price data in sixth paragraph is a month-on-month figure.)

China’s measures to control its property market are at a critical stage and the nation needs to focus efforts on curbing housing price gains in second- and third-tier cities, Chinese Premier Wen Jiabao said in an essay.

“We must unswervingly curb irrational housing demand, continue to strictly implement differential housing loans, tax policies and restriction on purchases,” Wen wrote in Qiushi magazine, a publication of the ruling Communist Party.

China has expanded its property control measures this year, raising down-payments requirements and mortgage rates to ease gains in home prices. The government said last month it will rein in residential prices in smaller cities.

“At the same time, we need to focus on suppressing overly rapid price gains in second- and third-tier cities, to promote a return to reasonable house prices,” Wen said in the article, which was posted in full on the magazine’s website today.

Home prices in the country remained “basically unchanged” in August from the previous month, SouFun Holdings Ltd. (SFUN) said in an e-mailed statement today. Residential prices in 56 cities rose from July, based on 100 locations tracked by SouFun, with average home prices nationwide climbing to 8,880 yuan ($1,392) a square meter (10.76 square feet), the nation’s biggest real- estate website owner said.

Xiamen, Fuzhou

Residential prices in August advanced 0.07 percent from July, SouFun said, the smallest increase in more than a year. The southeastern city of Xiamen in Fujian province posted the biggest gain of 2.4 percent from July, while provincial capital Fuzhou, fell the most by 1.9 percent, SouFun said. Shanghai dropped 0.1 percent, while prices in Beijing rose 0.3 percent.

China “must not slacken” on its plan to build 10 million units of affordable housing, Wen said in the article, adding the government will increase monitoring of those cities that fall behind in construction of these cheaper homes.

A gauge tracking property shares on the Shanghai Composite Index was little changed at the break.

The government’s report on new and existing home prices for August is due on Sept. 18.

China will expand its efforts to curb price gains in smaller cities after limiting home purchases in Beijing and Shanghai, according to a July 14 summary of a State Council meeting chaired by Wen. The government said so-called second and third-tier cities which have seen excessive price gains should restrict the number of homes each family is allowed to buy, according to the State Council or cabinet.

--Daryl Loo, Bonnie Cao. Editors: Andreea Papuc, Linus Chua

To contact Bloomberg News staff for this story: Daryl Loo in Beijing at +86-10-6649-7540 or dloo7@bloomberg.net; Bonnie Cao in Shanghai at +86-21-6104-3035 or bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net