China July Home Prices Rise as Nation Seeks Long-Term Policy

China’s new home prices rose the most since January 2011 in the nation’s four major cities, led by a 17 percent jump in Guangzhou and Shenzhen, on speculation the government will refrain from imposing tighter curbs.

Beijing and Shanghai prices both increased 14 percent in July as 69 of 70 cities tracked by the government climbed from a year earlier, according to a statement by the National Bureau of Statistics yesterday. For the third month in a row, the eastern city of Wenzhou was the only one to post a decline.

“The new leadership seems to have a higher tolerance for rising home prices than the previous government,” Ding Shuang, a senior China economist at Citigroup Inc. in Hong Kong, said in an interview yesterday. “It’s unlikely that the government will issue nationwide curbs or ease policies. The government will likely aim at long-term policies by increasing more supply.”

China will seek “stable and healthy” development of the property market, the government said on its website after a meeting last month led by President Xi Jinping, who took over the helm earlier this year. The government is expected to release a “long-term mechanism” for stable and healthy development in about three months, the official Xinhua News Agency reported on Aug. 15, citing Zhu Zhongyi, the deputy head of the China Real Estate Industry Association.

China’s “long-term” property policies, on which the government hasn’t elaborated, may include acceleration of shantytown redevelopment and property taxes in more cities, Citigroup’s Ding said.

More Land

A gauge tracking property shares on the Shanghai Composite Index rose 0.5 percent at the close of trading, the smallest gain among the five industry groups on the benchmark, which added 0.8 percent.

Beijing may supply more land for homebuyers who live in their properties, the Securities Times reported today. The near-term policy will help curb prices, the newspaper said.

China also plans to suspend some laws on foreign investment in proposed new free trade zones including Shanghai as part of Premier Li Keqiang’s drive to open up the economy to sustain growth. The changes will provide “innovative” ways of opening up the economy, remove unnecessary administration and help transform the state’s role in the economy, according to a State Council statement after an Aug. 16 meeting led by Li.

The premier also said last month fiscal funds should be used to redevelop shantytowns and improve basic infrastructure to stabilize the world’s second-largest economy.

The eastern city of Hangzhou in Zhejiang province may impose a property tax of as much as 1 percent, China Securities Journal reported today, citing an unidentified person.

Different Mentality

“The new leadership seems to have a different mentality on property policies,” Jack Gong, a Hong Kong-based property analyst at Orient Finance Holdings (H.K.) Ltd., said in a phone interview yesterday. “They may be less interested in tightening measures, but allow local governments to release their own property policies, depending on local situations.”

China in March stepped up a three-year campaign to cool home prices, with 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 to 70 percent from 60 percent and to enforce a 20 percent capital-gains tax on existing homes.

Existing home prices rose 15 percent in Beijing last month from a year earlier and increased 11 percent in both Shanghai and Guangzhou, according to the data.

More Signals

Private data also showed rising values. Home prices jumped 7.9 percent from a year earlier last month, according to SouFun Holdings Ltd., the nation’s biggest real estate website owner.

The government will have to tolerate gains in property prices in the short term with slower economic growth and as fiscal revenue “underperformed” in the first half, Zhang Zhiwei, a Hong Kong-based chief China economist at Nomura Holdings Inc., said in an e-mailed response to queries yesterday.

The value of home sales fell 17 percent in July from June, the statistics bureau reported Aug. 9.

Some smaller cities have already started easing some of the policies designed to restrain price gains. The eastern city of Wenzhou is “fine tuning” its home purchase restriction by allowing second-home purchases by some local residents, the official Xinhua News Agency reported on Aug. 15, citing a local housing bureau official. Yancheng in Jiangsu province suspended limits on housing prices as the supply of homes increased, the official People’s Daily newspaper reported on July 23.

Wenzhou’s home prices fell 2.4 percent last month from a year earlier, according to the data.

Home prices will stabilize in the second half of the year as the government focuses on the long-term development of the market rather than cracking down on it, Yu Liang, president of China Vanke Co., the country’s biggest developer on the mainland exchanges, said Aug. 9.

— With assistance by Bonnie Cao

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