China Home Prices Rise as Big Cities Post Record Gains

China’s June new home prices rose in all but one city, led by the biggest metropolitan centers and underscoring Premier Li Keqiang’s struggle to rein in speculative investment even as the economy cools.

Prices climbed in 69 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement today, matching the data in May. The southern business city of Guangzhou posted the biggest increase with a 16 percent advance from a year earlier. Prices climbed 13 percent in Beijing and 12 percent in Shanghai. All three cities had their biggest gains since the government changed its methodology for the data in January 2011.

“With the economy slowing down and other industries weakening, investors don’t have many choices but seek out property investment for good returns,” Yao Wei, China economist at Societe Generale SA in Hong Kong, said by phone today. “Many of the government measures have targeted the supply, which actually pushed home prices up further.”

China in March stepped up a three-year campaign to cool home prices, with only the capital city of Beijing issuing the toughest measures among 35 provincial cities. Beijing became the only region to raise the minimum down payment on second homes from 60 percent and to enforce a 20 percent capital-gains tax on existing homes.

Slowing Growth

China’s economic growth slowed to 7.5 percent in the second quarter from last year, the government’s data showed on July 16.

The ruling Communist Party made progress last month in reining in credit growth as officials seek to put the nation’s expansion on a more sustainable footing.

The only decline in new home prices last month was in the eastern city of Wenzhou, where they fell 2.8 percent from a year earlier, according to the data.

The Shanghai Stock Exchange Property Index, which tracks 24 developers, was 1.7 percent lower at the close of trading, the biggest drop among the five industry groups on the Shanghai Composite Index. The benchmark measure slid 1.1 percent.

Existing home prices rose 14 percent in Beijing last month from a year earlier and increased 10 percent in Shanghai and Guangzhou, according to the data.

New Direction

Private data also showed rising housing values. Home prices jumped 7.4 percent from a year earlier last month, the biggest gain since an eight-month series of declines ended in December, according to SouFun Holdings Ltd., the nation’s biggest real estate website owner.

“The government really has to think of a new direction for property policies, because its previous measures all have hit the wrong areas,” Yao said.

China may delay a planned nationwide property tax trial program, Zhang Ming, a researcher at the Chinese Academy of Social Sciences’ Institute of World Economics and Politics, wrote in a commentary published in the Securities Daily today.

The value of home sales rose 24 percent in June from May, the biggest monthly gain this year, the statistics bureau reported this week.

“Property is still a very important industry in China; we shouldn’t worry too much about further tightening,” Albert Lau, Shanghai-based China head and managing director at property broker Savills Plc, said at a press conference on July 16. “We can’t afford to have weak exports and sluggish property at the same time and everything else will follow.”

— With assistance by Bonnie Cao

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