China Home Prices Up in Most Cities, Posing Policy Challenge

China’s new home prices posted the broadest advance since December 2011, a test for new Premier Li Keqiang as he seeks to prevent a bubble without damping economic growth.

Prices climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said today. Beijing prices jumped 5.9 percent from a year earlier, the biggest since February 2011, while they advanced 8.1 percent in Guangzhou, the most since January 2011.

China on March 1 imposed its toughest curbs in a year, ordering the central bank to raise down-payment requirements and interest rates for second mortgages in cities with excessive price gains, enforcing a property sales tax and telling local governments with the biggest price pressures to tighten home-purchase limits. It ordered individuals selling properties to pay a 20 percent tax on the sale profit when the original purchase price is available, a levy that is being easily avoided.

“We are expecting more property policies in the next couple of months including those issued by local governments, because the fast-rising home prices have put the government under a lot of pressure,” said Ding Shuang, a senior China economist with Citigroup Inc. in Hong Kong. “It’s not only a big challenge for the new administration, but also shows that previous curbs have not worked.”

The Shanghai Stock Exchange Property Index, which tracks 24 developers, declined 1.4 percent to the lowest since Dec. 7 at the close of trading.

More Measures

The southern cities of Guangzhou and Shenzhen were among major cities that led gains in February from a year earlier.

Prices in Shenzhen advanced 5.7 percent. The special economic zone that borders Hong Kong said last week it is taking steps to guide developers in setting reasonable prices and is implementing the central government’s measures to ensure prices don’t rise too quickly.

The biggest decline in new home prices last month was in Wenzhou, where they tumbled 10.1 percent from a year earlier.

Existing home prices rose 6 percent in Beijing last month from 12 months ago and increased 3.9 percent in Shanghai, according to the data. They climbed 5.7 percent in Guangzhou and 3.9 percent in Shenzhen.

Local Response

Premier Wen Jiabao, who was succeeded by Li on March 15, had vowed to keep housing affordable and taken multiple measures. During his tenure, Wen raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing and enacted home-purchase restrictions in about 40 cities.

Local governments must respond to the central government’s March 1 policies, including home-price control targets, by the end of the month.

Private data also has shown increases in prices. Home prices rose for nine straight months, increasing 0.8 percent in February, according to SouFun Holdings Ltd., the country’s biggest real estate website owner.

China’s property prices will “definitely” decline this year, Shanghai Securities News reported on March 14, citing housing minister Jiang Weixin as saying.

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