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China July Home Price Growth Hits 11-Month Low, SouFun Says

China July Home Prices Rise Slowest in 11 Months
Potential buyers examine a model of a residential property development at a housing fair in Shanghai. China's home prices in July rose 6.8 percent from a year ago. Photographer: Qilai Shen/Bloomberg

China’s home prices rose at the slowest pace in 11 months in July after the government expanded efforts to curb the risk of an asset bubble, according to SouFun Holdings Ltd.

Home prices gained 0.2 percent in July from June, the slowest since August last year. Residential prices increased in 66 out of 100 cities tracked by the nation’s biggest real-estate website owner, with average home values nationwide climbing to 8,874 yuan ($1,378) a square meter (10.76 square feet), SouFun said on its website today.

China’s cabinet said last month it will expand measures to rein in residential prices to smaller cities after limiting home purchases in metropolitan areas including Beijing and Shanghai. The government is intensifying real-estate restrictions nationwide after developers posted gains in first-half sales and housing transactions climbed 31 percent in June, even as down payments on some mortgages were increased this year.

“China’s property market is cooling down gradually, but it’s still not obvious,” said Peter Bai Hongwei, a Beijing-based property analyst at China International Capital Corp., the country’s biggest investment bank. “This is a matter of time. With high inflation and investment, it’s unlikely home prices will drop soon.”

Home prices in July rose 6.8 percent from a year ago. The central Chinese city of Yichang posted a 1.9 percent gain from June, the biggest advance, while the eastern city of Suqian posted the largest decline of 2 percent among the 100 cities surveyed, SouFun said. Home prices in Shanghai rose 0.4 percent and Beijing 0.1 percent last month from June.

Rising Inflation

A gauge tracking property shares on the Shanghai Composite Index rose 1 percent, the best performer among the five industry groups on the benchmark, at the 3 p.m. local time close, extending this year’s gain to 2.8 percent.

New home prices in Beijing fell to the lowest last month since April 2010, when the government introduced the first round of measures to crack down on the market, China Securities Journal reported today, citing the local property transaction bureau, which uses a different statistics system to SouFun.

China’s consumer price index hit a three year high in June while investment in real estate rose 33 percent to 2.6 trillion yuan in the first six months from a year earlier, according to the national statistics bureau.

Nationwide Restrictions

Nationwide purchase restrictions may damp local economies, said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd.

“The one-size-fits-all rule may not have as good an effect as expected because local governments still highly rely on land sales for revenue,” Liu said in a phone interview.

China’s financial center Shanghai said last week that it will step up inspections on the pricing of new homes to ensure that they aren’t set at “unreasonably” high prices, in response to the central government’s order.

“The property market in China is headed for a big bust,” Puru Saxena, chief executive officer of Puru Saxena Wealth Management in Hong Kong, told Bloomberg Television on July 25, citing excess capacity and empty condos. “I suspect over the next 18 months to two years, we’ll see a significant decline in Chinese real estate prices.”

June new home prices rose in all but three of the 70 Chinese cities monitored by the government. The government’s indexes of new and existing homes for July are due on Aug 18.

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