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China’s New Home Prices Rise for 5th Month on Sales, SouFun Says

China’s new home prices rose for a fifth month as sales picked up in a sign government curbs are helping stabilize the property market.

Prices climbed 0.17 percent to 8,768 yuan ($1,405) per square meter in October from September, SouFun Holdings Ltd. (SFUN), the country’s biggest real estate website owner, said in an e- mailed statement today, based on its survey of 100 cities. The growth rate was the same as in September.

“The market has quite a healthy status with modest price and sales rises,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research. “This is what the government would like to see.”

Home prices have reversed declines since June after the central bank cut interest rates to stem an economic slowdown and some local authorities eased restrictions as land-sale revenues fell. China’s property curbs have shown “preliminary effects,” though the market is still “unstable,” the official Xinhua News Agency said on Oct. 17, citing Premier Wen Jiabao’s comments in meetings he held with industry leaders, company executives and some local government officials on Oct. 12-15. The government should stick to the property policies, he said.

The measure tracking property stocks on the Shanghai Composite Index rose 3 percent as of 10:59 a.m., the biggest gain among five industry groups on the benchmark.

Credit Outlook

The eastern city of Wenzhou had the biggest gain in October, increasing 3.7 percent, SouFun said today.

September new home prices rose in fewer than half of the 70 cities that the government tracks from a month earlier, government statistics showed last month. Official figures are released on the 18th of each month.

China’s housing prices should continue to “rationalize” over the next 12 to 18 months as the central government’s “strong hand” on the sector remains, Sanford C. Bernstein Ltd. analysts, led by Kenneth Tsang, wrote in a report yesterday.

Chinese developers’ credit outlook improved as the recovery in prices eased liquidity pressures and a slowing economy limited authorities’ incentive to further tighten policy, Standard & Poor’s said in a Sept. 18 report. The credit rating company may see some “positive rating actions” in the next six months as defaults by so-called distressed developers are less likely after asset sales.

Home sales rose 20 percent in September from a month earlier to 540.4 billion yuan, according to data from the National Bureau of Statistics.

Improving Sales

Chinese developers reported an increase in earnings in the third quarter as sales recovered. China Vanke Co. (000002), the country’s biggest developer by market value, said last week third-quarter profit more than doubled to 1.35 billion yuan from a year earlier as it started selling more residential projects to tap a recovery in home sales.

The government has raised down-payment and mortgage requirements in its more than two-year effort to curb the property market. It also imposed a property tax for the first time in Shanghai and Chongqing, increased construction of low- cost social housing and enacted home-purchase restrictions in about 40 cities.

The government’s property policy is unlikely to change drastically even after the country completes its once-in-a- decade leadership transition that begins later this month, according to CIMB’s Hu.

Home prices fell 1 percent last month from a year earlier, according to today’s SouFun statement.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

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

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