China Home Prices Extend Gains in June

iNVEZZ.com Thursday, July 18th: New home prices in almost all major Chinese cities posted a strong year-on-year rise in June, new data has shown, but the market is showing signs of moderation following last month’s government-led liquidity squeeze.

Average new home prices in 70 major Chinese cities climbed in June by 0.8 percent from the previous month, easing slightly from May’s month-on-month gain of 0.9 percent, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Thursday. On an annual basis, new home prices rose 6.8 percent in June, the sixth consecutive rise and the fastest pace of increase since Reuters started the calculation in January 2011.

Month-on-month, new home prices advanced in 63 of 70 cities tracked by NBS in June, down from 65 in May. Yet, compared to a year earlier, home values climbed in 69 of the 70 cities the government tracked last month, matching the data for May. Wenzhou was the only region to show decline last month, with prices down 2.8 percent. The southern business city of Guangzhou posted the biggest increase with a 16 percent advance from a year earlier, while prices climbed 12.9 percent in Beijing and 11.9 percent in Shanghai. The three cities had their biggest gains since NBS changed its methodology for the data in January 2011.

**Price Rise Slowing M/M on Covernment’s Cooling Measures**
Despite the relentless rise in China home prices, the pace of the month-on-month increase has slowed slightly for the third straight month in June. *The Wall Street Journal* today quoted Lee Wee Liat, a property analyst at BNP Paribas, as saying: “The moderation in growth momentum will likely continue, but home prices are not going to drop.” He added that a sharp decline is unlikely as many Chinese cities have issued guidance targeting home price growth at 10 percent, alongside expected gains in disposable income per capita.

The latest NHS statistics have once again highlighted the challenges facing China’s nearly four-year-old campaign to contain the surge in home prices. In March, the country stepped up its efforts to cool the property market. The capital city of Beijing became the only region to raise the minimum down payment on second homes and to enforce a 20 percent capital-gains tax on existing homes. Analysts say banks in major cities have started to remove discounts on mortgages to first-time home buyers and are taking longer to approval mortgages, which would also contribute to slow down the rise in prices.

!m[Market Showing Signs of Moderation Despite 6.8% Annual Rise](/uploads/story/4106/thumbs/pic1_inline.jpg)
According to some analysts, however, China may delay its planned nationwide property tax trial programme, as the real-estate market is a key driver for the economy in a time of slowing growth.
“With the economy slowing down and other industries weakening, investors don’t have many choices but seek out property investment for good returns,” Bloomberg quoted Yao Wei, China economist at Societe Generale SA in Hong Kong, as saying today.
**The Shanghai Stock Exchange Property Index, which tracks 24 China property developers, fell 1.4 percent today, the biggest drop among the five industry groups on the Shanghai Composite Index.**