China Home Prices Rise in Fewest Cities in a Year Amid Curbs

  • Prices gained in 45 cities in January, versus 46 in December
  • Lenders in some cities said to raise first-home mortgage rates

Are China's Property Curbs Starting to Take Hold?

China home prices increased last month in the fewest cities in a year, signaling property curbs to deflate a potential housing bubble are taking effect.

New-home prices, excluding government-subsidized housing, gained last month in 45 of the 70 cities tracked by the government, down from 46 in December, the National Bureau of Statistics said Wednesday. Prices fell in 20 cities and were unchanged in five.

Chinese authorities have expanded curbs on home purchases and tightened restrictions on property lending in an attempt to avoid a housing bubble and reduce financial risks. Some bank branches in Beijing, Guangzhou and Chongqing have raised mortgage rates for first-time buyers, people familiar with the matter said earlier this month.

New-home prices in Shenzhen, the nation’s hottest market early last year, fell 0.5 percent in January from December, the fourth straight monthly decline, the data showed. Prices in Shanghai declined 0.1 percent, a third monthly decline, and were unchanged in Beijing. Values continued to increase in the southern city of Guangzhou, gaining 0.6 percent.

A drop in land releases this year may keep pressure on prices in the capital.

Beijing plans to supply just 260 hectares (642 acres) of residential land, excluding government subsidized housing, this year, down from 850 hectares last year, Beijing News reported, citing a government document.

Cooling Measures

While the statistics bureau said home values “stabilized further” in mega and midsize cities due to curbs, the government is likely to hold steadfast on cooling measures this year, said Bloomberg Intelligence senior analyst Patrick Wong. Further tightening of mortgage lending could come after at least seven local city governments stepped up existing buying curbs since December, Wong said.

Early private data showed residential transactions are recovering slightly in February in large cites. New-home sales in key cities tracked by China International Capital Corp. rose to a three-month high last week.

China’s central bank vowed to “strictly limit” the flow of credit into speculative housing purchases in its fourth-quarter monetary policy report Feb. 18. Apart from adopting prudent monetary policies, it encourages “city-specific” credit conditions to ensure “reasonable” growth in housing mortgages, the report said.

The wording is “a clear message” that China’s central bank will roll out more policy tools targeting developers and households to prevent a potential property bubble, David Yang, a Shanghai-based analyst at UOB Kay Hian Investment Co., wrote in a report Tuesday.

Land Prices

Curbs have been tightened on developer financing, amid concern easy credit helped send land prices to record highs last year. Some property bond sales were halted on mainland exchanges in October, and this month private equity investments in property projects were banned in key cities.

“Land prices are an expectation for where property prices will be going,” said James Macdonald, Shanghai-based head of China research for Savills Plc. “Cooling the residential market through restrictions on housing purchases was not sustainable, as we saw last year. So the government went to cool down competition for land to have a bigger impact.”

There’s signs the curbs are biting. Three plots of residential land in Shanghai last week sold at a small premium to the starting offer prices.

— With assistance by Emma Dong

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