China Home Prices Jump as Guangzhou, Shenzhen Lead Advances

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Residential buildings stand at night in the Pudong area of Shanghai. Close

Residential buildings stand at night in the Pudong area of Shanghai.

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Photographer: Tomohiro Ohsumi/Bloomberg

Residential buildings stand at night in the Pudong area of Shanghai.

New home prices in China’s four major cities rose the most since January 2011, raising concerns of a bubble as home buyers were emboldened by a lack of new nationwide property curbs.

New home prices in October jumped 21 percent from a year earlier in the southern city of Guangzhou and 20 percent in nearby Shenzhen, 18 percent in Shanghai and 16 percent in Beijing, the National Bureau of Statistics said in a statement today. Prices rose in 69 of the 70 cities tracked by the government.

Shenzhen and Shanghai this month raised minimum down payments for second homes to 70 percent, following a similar move by Beijing in March, as local authorities struggle to contain price gains. Housing sales jumped 33 percent in the first 10 months of this year as Premier Li Keqiang refrained from adding new nationwide restrictions that would hurt economic growth.

“On the one hand I can’t see the possibility of policy being tightened further to curb prices while on the other hand demand continues to increase as homebuyers expect more price gains,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co.

A gauge tracking Shanghai-traded developers advanced 2.7 percent, the most since Sept. 23. China Vanke Co. (000002), the biggest real estate company traded on mainland exchanges, jumped 3.3 percent, the most in more than a month, to 9.20 yuan in Shenzhen.

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A man stands on the Pearl River waterfront across from high-rise buildings in Guangzhou on June 26, 2012. Close

A man stands on the Pearl River waterfront across from high-rise buildings in Guangzhou on June 26, 2012.

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Photographer: Nelson Ching/Bloomberg

A man stands on the Pearl River waterfront across from high-rise buildings in Guangzhou on June 26, 2012.

Bigger Deposits

Former Premier Wen Jiabao in March stepped up a three-year campaign to contain price gains, ordering cities with excessive increases to raise down payments. Shenzhen upped the deposit level from 60 percent on Nov. 1, one week before Shanghai announced the same move.

Guangzhou, the only one of the four so-called first-tier cities that hadn’t done so, today said it will raise the required down-payment for second-home purchasers from the current 60 percent of property value, the official Xinhua News Agency reported, citing a government statement.

Shanghai also tightened the qualifications required for non-local homebuyers and will increase residential land supplies, according to a Nov. 8 statement on the local housing bureau’s website.

‘Decisive’ Market

Chinese leaders’ decision to let the market play a “decisive” role, passed at a plenary meeting by the Party’s Central Committee ended Nov. 12, implies that regulation in the property market will gradually shift from demand-side administrative curbs to supply-side market measures, Barclays Plc analysts wrote in a report today.

“We see little chance for any brand new demand-side administrative curbs, whereas some short-term policy headwinds, such as property tax trials and stricter idle-land regulations, seem just around the corner,” the analysts, led by Hong Kong-based Alvin Wong, wrote in a report today.

Supply increases helped trim month-on-month price gains from September, and prices on this basis may start to fall as early as the end of second quarter next year as stock remains abundant and sales slow, according to Luo Yu, a Shanghai-based analyst at advisory firm CEBM Group.

New home prices excluding government-subsidized social housing rose an average 0.7 percent in October from 0.9 percent the previous month because of tighter curbs in some cities and as developers boosted supply in a traditionally strong season for property sales, the bureau’s senior statistician, Liu Jianwei, said in a statement on the agency’s website.

Wenzhou Declines

For the sixth month in a row, the eastern city of Wenzhou was the only one to post a decline, with new home prices dropping 1.4 percent from last year, the bureau said.

Listed developers’ contracted sales jumped 42 percent from a year earlier, Haitong International Securities Co. analysts led by Hugo Hou wrote in a Nov. 13 report.

China’s average new home price surged 10.7 percent in October from a year earlier, the most this year, on demand for higher-priced apartments, according to SouFun Holdings Ltd., the nation’s biggest real estate website owner. The price rose to 10,685 yuan ($1,754) a square meter (10.76 square feet), SouFun said.

Shanghai’s new measures are “credit negative” for developers as they put pressure on sales and prices, Moody’s Investors Service analysts led by Franco Leung wrote in an e-mailed report Nov. 14. Companies that may be affected include Shanghai Industrial Urban Development Group Ltd. (563) and Glorious Property Holdings Ltd. (845), according to the report.

Existing home prices rose 19 percent in Beijing last month from a year earlier, followed by a 14 percent increase in Shenzhen and 13 percent in Shanghai, according to the data.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net

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

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