China SouFun July Home Prices Rise on Hopes of Benign Policies

China’s new home prices jumped in July by the most since December as buyers don’t expect the government to tighten the property market further and push housing values lower.

Prices surged 7.9 percent last month from a year earlier, to 10,347 yuan ($1,688) per square meter (10.76 square feet), SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner, said in an e-mailed statement after a survey of 100 cities. Prices began rising from a year earlier in December, when they climbed 0.03 percent after a 0.46 percent slide in November.

China will seek “stable and healthy” development of the property market, the government said on its website after a meeting led by President Xi Jinping this week, prompting speculation that the government may relax property curbs. Former Premier Wen Jiabao in March stepped up a three-year campaign to cool home prices, ordering the central bank to raise down-payment requirements for second mortgages in cities with excessive cost gains.

“Demand from first-home buyers is still strong in the market, while the policy uncertainty has been dismissed as it’s unlikely for the central government to issue a nationwide tightening policy,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “Local governments with big price gains may announce some city-level property policy though.”

With the increasing uncertainty about China’s economy, the expectation for harsher property curbs is weakening, SouFun said in the statement.

Smaller Cities

Home values in the southern business hub of Guangzhou soared 23 percent from last year, while in the capital Beijing they jumped 20 percent, SouFun said.

“Unlike the previous government, the new leadership seems to aim for long-term development of the property market by allowing the market to play a bigger role rather than using administrative orders,” Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said in a phone interview before today’s releases.

Smaller cities have already begun easing some of the policies designed to restrain price gains. Yancheng, in Jiangsu province, suspended limits on housing prices as supply of homes increased, the official People’s Daily newspaper reported on July 23.

The southern city of Dongguan in Guangdong province led month-on-month declines among the 100 cities in the SouFun survey, declining 1.7 percent from June.

“The housing price gap widened further between major and smaller cities,” Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, wrote in a note to clients today.“This should continue to prevent the central government from implementing nationwide housing measures in the near term.”

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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