China Home-Price Gains Cooling May Limit Further Curbs: Economy

China August Home Prices Rise in Fewer Cities Easing Policy Woes
The property measures have achieved “obvious results” and the rapid increase in prices are under control, while the government needs to firmly rein in buying for speculation and investment, the official Xinhua News Agency reported on Sept. 1, citing Premier Wen Jiabao’s comments during an inspection tour in Tianjin. Photographer: Nelson Ching/Bloomberg

Prices for newly constructed homes in China rose in fewer cities in August than the previous month, reducing the likelihood that policy makers will strengthen steps designed to constrain property prices.

Thirty-five of 70 cities covered by the statistics bureau’s monthly report had price gains, compared 49 in July, today’s release showed in Beijing. The slowdown follows restrictions on mortgage credit and purchases of multiple homes.

Along with data showing fixed-asset investment in real estate is stabilizing, the figures suggest that Premier Wen Jiabao may be making progress in cooling the market without causing a collapse in construction. A soft landing for the property market would help avoid adding risks to an economy already poised for its weakest expansion in 22 years.

“If housing prices keep easing and property investments hold steady, as shown in August data, the negative effects as we have seen in the past will disappear, and that’s positive for China’s future growth,” said Ding Shuang, senior China economist with Citigroup Inc. in Hong Kong. “The government is less likely to launch any new tightening measures.”

China’s property market accounts for as much as about 13 percent of the nation’s gross domestic product -- and about 25 percent of GDP including related industries from construction to decoration, according to Ding.

Growth Projections

Banks and brokerages have cut their GDP forecasts this month, with UBS AG, Morgan Stanley and Barclays Plc predicting the nation’s growth will sink to 7.5 percent this year, the lowest since 1990. That compares with 9.3 percent in 2011.

A gauge tracking property shares in Shanghai rose 0.2 percent as of 1:35 p.m. local time. The broader benchmark Shanghai Composite Index was down 0.6 percent, while the MSCI Asia Pacific index fell 0.1 percent.

An inspection in July ordered by the State Council found recent increases in prices and easing policies by some local authorities among issues that needed “particular attention,” the official Xinhua News Agency reported on Aug. 17.

The property measures have achieved “obvious results” and the rapid increase in prices is under control, while the government needs to firmly rein in buying for speculation and investment, Xinhua said Sept. 1, citing comments by Wen.

Beijing Gain

Nineteen cities saw price declines, while values in 16 cities were unchanged, today’s data showed. The eastern city of Wuxi and the central city of Zunyi led the month-on-month gains at 0.5 percent. Among major cities, prices in Beijing and the southern economic hub of Shenzhen rose 0.1 percent from July, while those in Shanghai were unchanged.

“Home prices are losing steam after a couple of months of rallying and the market is stabilizing because there is no more upcoming monetary easing and the curbs still remain in place,” Yao Wei, a Hong Kong-based economist at Societe Generale SA, said in a telephone interview today. “Buyers are keeping a wait-and-see stance.”

Elsewhere in the Asia Pacific region, Sri Lanka’s central bank left benchmark interest rates unchanged for a fifth month today to contain rising prices.

India will report inflation data for August today. In July, consumer prices rose 9.86 percent from a year earlier, the slowest pace in four months.

Today’s Data

In Europe, Turkey will hold its benchmark rate at 5.75 percent, according to all 10 economists in a Bloomberg survey. The U.K. may report that inflation eased last month, while a measure of investor confidence will be released in Germany.

The U.S. may report a $125 billion current-account deficit for the second quarter, down from $137.3 billion in the first three months of the year, another survey of analysts showed.

In its more than two-year effort to curb the property market, China has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, increased construction of low-cost social housing and enacted home-purchase restrictions in about 40 cities.

Even so, private data have pointed to a pickup. China’s home prices rose for a third month in August, SouFun Holdings Ltd., the nation’s biggest real-estate website owner, said on Sept. 3.

Existing home prices in Beijing and Shanghai rose 0.3 percent from July, today’s data showed. The value of home sales transactions rebounded by 0.6 percent in August after dropping 14.5 percent in July from June, according to the statistics bureau.

“The gains in fewer cities reduced concerns about more property tightening measures,” Jinsong Du, a property analyst at Credit Suisse Group AG, said in an interview in Shanghai. “What’s happening in reality is that home prices are still rising. It’s easy for local governments to manipulate data as they could simply stop granting permits for high-price projects.”

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