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China April Home Prices Gain as Smaller Cities Defy Curbs

China April Home Prices Gain as Smaller Cities Defy Curbs
A model of a residential property development is displayed at a housing fair in Shanghai. Photographer: Qilai Shen/Bloomberg

China’s home prices rose in 67 of 70 cities monitored by the government in April from last year, led by smaller cities that are defying efforts to control property prices nationwide.

Housing prices increased at a faster pace in smaller cities and slowed in major ones, data posted on the statistics bureau’s website today showed. New home prices in Urumqi, capital of far western Xinjiang province, posted the biggest gain, up 9.3 percent last month from a year earlier, while prices in northern Mu Danjiang climbed 8.7 percent. In the capital Beijing, prices rose 2.8 percent in April, compared with 4.9 percent in March, while those in Shanghai slowed to a 1.3 percent gain.

The government said last week it doesn’t plan to ease property curbs, ordering local governments to continue to implement existing measures. The government raised the minimum down payment for second-home purchases this year and introduced residential taxes in Shanghai and Chongqing. Beijing and Guangzhou also imposed restrictions on housing purchases.

“It means speculators are shifting from major cities to shield from government curbs,” said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd. in a phone interview today. “The property measures are only working in some cities but not nationwide. It’s raising new challenges for the government.”

The measure tracking property stocks on the benchmark Shanghai Composite Index rose 0.7 percent at the 3 p.m. local time close. The gauge gained 9.6 percent this year compared with a 2.3 percent advance in the benchmark.

Beijing, Shanghai

Premier Wen Jiabao said May 1 that the nation is “determined” to bring down housing prices in some cities to a “reasonable” level.

New home prices in Beijing rose 0.1 percent last month from March, while Shanghai posted a 0.3 percent monthly gain.

Existing home prices in Beijing fell 0.7 percent last month from a year earlier and were up 0.1 percent from March, while those in Shanghai jumped 0.2 percent from a year ago and climbed 0.6 percent from the previous month.

Growth of real estate companies’ new bank accounts used for settlements in so-called first-tier regions including Beijing and Shanghai, and the provinces of Guangdong and Jiangsu, slowed, suggesting the government’s property policies are starting to take effect, the central bank said in a statement on its website today.

“Home prices remained strong in smaller cities because government policies are difficult to implement there,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA, in a phone interview, before today’s release.

Sales Value

Nine cities had monthly declines compared with 12 in March, while home prices in 32 cities rose more than 5 percent in April from a year earlier, according to today’s numbers.

China’s home sales value fell 21 percent to 324.9 billion yuan ($50 billion) in April from the previous month after the government expanded the measures to tackle risks of asset bubbles, the statistics bureau reported last week.

“With the sales volume shrinking, home prices will fall; it’s just a matter of time,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research Pte, who said he expects big developers to cut prices first.

China Vanke Co., the nation’s largest publicly traded developer, said on May 3 that contracted sales rose 1.3 percent from a year ago to 7.9 billion yuan.

“The government’s measures have had a very clear impact on the market,” Tan Huajie, Vanke’s board secretary, said in a May 3 statement.

Rising Rates

Raising interest rates may help the property measures take effect nationwide, ANZ Bank’s Liu said. The central bank raised rates twice this year and increased the amount banks need to set aside as reserves five times.

China stopped releasing nationwide average property prices and changed the methodology of the survey starting this year, the statistics bureau said on Feb. 17, as the government is facing pressure to rein in rising housing values.

“China’s property measures will remain tight this year given Premier’s repeating pledges and a tightening monetary policy environment we are in,” Societe Generale’s Yao said.

Private data has showed that the country’s housing market remains robust. China’s home prices rose for an eighth month in April, SouFun Holdings Ltd., China’s biggest real estate website, reported on May 3.

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