China’s new home prices jumped in June by the most since they reversed declines in December, defying the government’s tightened property curbs as increased sales supported developers’ efforts to avoid price cuts.
Prices surged 7.4 percent last month from a year earlier to 10,258 yuan ($1,671) per square meter (10.76 square feet), SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner, said in a statement after a survey of 100 cities. Last month’s increase was the biggest since December, when prices climbed 0.03 percent, reversing a 0.46 percent fall in November.
The Chinese government is facing a dilemma to cool the property market while sustaining growth in the world’s second-largest economy, according to Nomura Holdings Inc. The country stepped up a three-year campaign to cool home prices in March, while only the capital city of Beijing among 35 provincial-level cities issued the toughest measures, according to Centaline Property Agency Ltd., China’s biggest real estate agency.
“Sales have been stable, but supplies didn’t increase; prices naturally will trend upwards,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co., citing the current demand to own or upgrade first homes after speculators were driven out by government curbs. “The central government will probably still wait and see, as the current price increases are a result of market mechanisms.”
A gauge tracking property shares rose 1.1 percent at the close of trading in Shanghai, while the benchmark Shanghai Composite Index added 0.8 percent.
The value of home sales rose 1.7 percent in May from the previous month to 503 billion yuan, the National Bureau of Statistics reported June 9.
“Both new and existing-home transactions gradually stabilized recently in many cities, indicating that home buying demand remains strong,” SouFun said in the statement today. “Driven by the multiple factors including demand and a heated land market, the pressure for home-price increases is still relatively large” for the second-half of this year.
China’s economy grew 7.7 percent in the first quarter, less than the 8 percent median forecast in a survey of 41 economists.
Home prices rose 0.77 percent last month from May, narrowing by 4 basis points from the previous month on a month-on-month basis as some banks tightened mortgage policy amid a cash crunch, according to the SouFun statement.
The city of Changshu in eastern Jiangsu province had the biggest gain last month from May, with prices increasing 3.6 percent, SouFun said. Home values in the capital Beijing jumped 1.6 percent from the previous month, while those in Shanghai, the country’s financial center, added 0.6 percent.
China’s property industry was raised to outperform to market perform by Toni Ho, Hong Kong-based analyst at BOCOM International Securities Ltd. last week, because the government’s property policies are “stabilizing measures” rather than radical ones to create a turning point.
Sentiment also improved in the land market. Land sales in Beijing as of June 27 hit 66 billion yuan, exceeding the total value of the city last year, China Securities Journal reported on June 28, without citing anyone.
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