China August Home Prices Rise on Major Cities’ Record Gains

New home prices in China’s four major cities rose the most since January 2011 last month, led by a 19 percent jump in Guangzhou, as the government refrains from imposing further curbs to cool the market.

Beijing and Shanghai prices climbed 15 percent from a year earlier, while in Shenzhen they gained 18 percent, the National Bureau of Statistics said in a statement today. Prices rose in 69 of 70 cities tracked by the government, the same as in July.

Premier Li Keqiang has come up with no additional measures to rein in property prices since his predecessor Wen Jiabao stepped up a three-year campaign in March to cool the housing market, ordering the central bank to raise down-payment requirements for second mortgages in cities with excessive cost gains. Thirty-five provincial cities have set annual home-price targets this year, mostly capping gains at the growth rate of local disposable incomes.

“The government is unlikely to take strong action nationwide to curb the property market, as that may damp economic growth,” said Zhu Haibin, Hong Kong-based chief China economist with JPMorgan Chase & Co. in a phone interview today. “But local governments should come up with their own property policies by tightening in major cities and making some adjustments in smaller ones that have too much housing supply.”

Major Cities

A gauge tracking property stocks on the Shanghai Composite Index rose 2.2 percent at the close of trading, the best performer among the five industry groups on the benchmark, which closed 0.3 percent higher.

All four of the country’s major cities had their biggest gains since the government changed its methodology for the data in January 2011. For the fourth month in a row, the eastern city of Wenzhou was the only one to post a decline, with prices dropping 2.1 percent from last year.

The rally of home prices in major cities will probably continue because September and October are the traditional peak season for property sales in China, said JPMorgan’s Zhu.

Existing home prices rose 16 percent in Beijing last month from a year earlier and increased 11 percent in Shanghai and Guangzhou, according to the data.

Private data have shown rising housing values. Home prices jumped 8.6 percent from a year earlier last month, the biggest gain since December, according to SouFun Holdings Ltd., the nation’s largest real estate website owner.

Land Prices

A rally in the land market also fueled home prices, according to SouFun. A residential land parcel in Beijing sold at a record price 73,000 yuan ($11,924) per square meter (10.76 square feet) on Sept. 4, while Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer by market value, bought a site in Shanghai for 21.8 billion yuan in an auction the next day, a record price in that city.

New home prices rose in 66 out of 70 cities in August from a month earlier, according to today’s data. That compared with 62 cities in July.

The value of home sales fell for a second month in August to 514.6 billion yuan, the statistics bureau reported Aug. 9.

The government is expected to release a “long-term mechanism” for stable and healthy property-market 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.

Property Policies

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, according to Citigroup Inc.

Smaller cities have taken their policies in different directions. The eastern city of Wenzhou is “fine tuning” its home purchase restrictions by allowing second-home purchases by qualified local residents, Xinhua reported on Aug. 15, citing a local housing bureau official. The northern city of Zhengzhou banned residents under 20 years old from buying homes, the Securities Times reported on Sept 3.

Wang Jianlin, China’s richest man and owner of closely held Dalian Wanda Group, the country’s biggest commercial land developer, is seeing an overheated real estate market.

The property market is “definitely” in a bubble, though it is “controllable” and not big, Wang said in an interview on Sept. 11 before the World Economic Forum in Dalian, in the country’s northeast.

— With assistance by Bonnie Cao

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