China Will Not Relax Property Controls, Xinhua Reports

China won’t relax property controls and ordered local governments that have relaxed housing policies to “strictly implement” them to prevent a rebound in prices, Xinhua News Agency reported, citing a government circular.

Real estate curbs are still at a “critical stage,” the Ministry of Land and Resources, and the Ministry of Housing and Urban-Rural Development said in an “urgent notice,” the official news agency said yesterday. “Fluctuations have appeared recently in the property market and land market. Although they have not changed the overall picture, the complexities and instabilities have increased in the market.”

China’s property market is showing signs of rebounding even as Premier Wen Jiabao has pledged to keep in place curbs that include increased down payments and limits on the number of units owned. Prices in June rose in the most cities tracked by the government in 11 months, the statistics bureau said July 18, and home sales have picked up.

“These orders follow what the Premier has said before,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research. “The market hasn’t gone far enough that the government would introduce new enforcements. They are now just emphasizing the existing policies.”

A gauge of property stocks traded in Shanghai declined 1 percent, to the lowest since April, and was the biggest drop among the five industry groups on the Shanghai Composite Index (SHCOMP) benchmark at the close of trading.

Government Warning

Local governments should set “reasonable” starting prices for land auctions and adjust their sale plans in advance if the sites are “highly likely” to generate record prices, Xinhua reported, citing the notice. The Ministry of Land and Resources will step up monitoring of the land market, it said.

Residential land in Beijing’s Haidian district sold at auction on July 10 for a record 2.63 billion yuan ($413 million), or 33,831 yuan per square meter (10.76 square feet). That makes it the most expensive tract ever sold in the capital, higher than the previous record set in 2009, when Chinese property was in the middle of a price bubble that started deflating last year.

Wen said July 7 that citizens are worried prices will rise again, reiterating a vow that his government will “unswervingly” continue property controls. At the same time, the People’s Bank of China, concerned about slowing economic growth, cut its benchmark interest rates on July 5 for the second time in a month.

Local governments should not relax property curbs without authorization, while those that have already eased should immediately correct, the notice said.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at

To contact the editor responsible for this story: Andreea Papuc at

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