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Tuesday, July 19, 2011

China housing inflation up 4.2% in June

BEIJING: China's annual housing inflation ticked higher in June for the first time this year, official data showed yesterday, keeping up pressure on the government to rein in the red-hot property sector.

Many economists have warned that a bursting of a property bubble is the biggest risk facing the world's second-largest economy in the medium to long term.

China's average new home prices rose 4.2% in June from a year earlier, an uptick from an annual rise of 4.1% in May, according to Reuters calculations from official data published yesterday.

Month-on-month, however, home prices grew at a slower pace in June, for a sixth month in a row.

Earlier this year, the agency stopped publishing its average national home price index.

The government has unveiled a spate of heavy-handed measures to cool down the property sector, including home-purchase restrictions alongside higher down payments and mortgage rates.

Such tightening efforts have started to bite, but property buying interest remains strong as the real interest rates remain deeply negative, analysts say.

China's cabinet rolled out new steps last Thursday, taking its heavy-handed purchase restrictions to smaller cities while urging local officials nationwide to increase efforts to curb property speculation.

That would make the operating environment even harder for Chinese developers and force them to sacrifice prices to boost sales performance sooner rather than later, analysts said.

“Home prices will fall slightly in the second half,” Sun Jianping and Li Pinke of Guotai Junan Securities, said in a note last week after talking to six major developers including China Vanke and Poly Real Estate.

Cooling home prices is an important part of China's priority to check inflation, which hit a three-year high in June.

The central bank has increased interest rates three times so far this year, with the latest move on July 6. Meanwhile, Chinese banks have also demanded higher down payment and mortgage rates, beyond regulatory requirements, making it harder and dearer for people to buy homes.

New home prices in Beijing rose 2.2% in June from a year earlier, up from a 2.1% annual rise in May, the National Bureau of Statistics reported yesterday.

In Shanghai, prices climbed 2.2% last month, compared with a rise of 1.4% in May. Reuters

Chinese property shares ended down 0.3% at GMT 0312, underperforming a rise of 0.04% in the benchmark Shanghai stock index yesterday morning.

Apart from Beijing and Shanghai, annual housing inflation also accelerated in other big cities, including Shenzhen and Guangzhou.

A cabinet meeting chaired by Premier Wen Jiabao concluded on Thursday that “some cities are still facing pretty high upward pressure on home prices and others are relaxing their tightening efforts.”

Prices have been rising faster so far this year in smaller cities where the purchase restriction is non-existent or lax.

For example, new home prices rose the fastest in Urumqi, capital of the far western region of Xinjiang, by 9.2% in June from a year earlier.

In May, the northeastern city of Dandong witnessed the quickest annual home price rise of 9.7%.

Prices of new homes, including affordable housing, fell in three cities of Hangzhou, Sanya and Nanchong, in June from a year earlier, as compared with three in both May and April.

In month-on-month terms, cities saw housing price declines in June, as compared with nine in both May and April.

By Reuters

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