China’s real estate prices rose for a 19th month in December, raising concerns that the government will expand curbs to limit the risk of asset bubbles in the world’s fastest-growing major economy. Property stocks fell.
Prices in 70 cities rose 6.4 percent in December from a year earlier, China Information News, the statistics bureau’s newspaper, reported today, less than the 7 percent median estimate in a Bloomberg News survey of six economists. Prices gained 0.3 percent from November, the newspaper said.
Property prices increased even as China suspended mortgages for third-home purchases and pledged to speed up trials of real estate taxes. The People’s Bank of China raised interest rates again on Dec. 25, after increasing them for the first time in three years in October.
Home prices are still rising, especially for existing homes, and that may lead to concerns that the government will continue its tightening of the property market and more cities will impose a limit on home purchases,” said Cathy Yin, an analyst at Shenyin Wanguo Securities Co. in Shanghai. “Investors are using that as a catalyst to sell property stocks.”
Prices of existing homes climbed 0.5 percent in December, the most in three months, according to the report.
The gauge tracking property stocks on the benchmark Shanghai Composite Index slumped 3.8 percent at the 11:30 a.m. local time break, the most among five industry groups on the key measure. China Vanke Co., the nation’s biggest listed developer, lost 4.4 percent to 8.65 yuan, and Poly Real Estate Group Co., the second biggest, declined 6.4 percent to 13.94 yuan, the biggest decline since Nov. 12.
More Bank Reserves
China’s central bank told lenders on Jan. 14 to hold more deposits as reserves for the fourth time in two months, lifting required ratios by half a percentage point. Premier Wen Jiabao said in a National Radio broadcast on Dec. 26 that measures to curb the country’s property market weren’t well implemented. The government also pledged to almost double the number of affordable housing to 10 million units in 2011.
“Continued increases in prices will worry policy makers, given how unaffordable homes have become,” said Dariusz Kowalczyk, economist with Credit Agricole CIB in Hong Kong. The slower price gain in December “is unlikely to be enough to prevent further measures to cool the market,” he said.
Investment in real-estate development in December rose 12 percent to 557 billion yuan ($84 billion) from a year earlier, according to the report, while full-year investment climbed 33 percent to 4.83 trillion yuan. Property sales increased 22 percent to 1.02 trillion yuan during the month, with 218 million square meters (2.3 billion square feet) of real estate sold, a 12 percent gain from a year earlier, the newspaper said.
Hainan’s Home Prices
Sanya, a resort city on Hainan island in China’s south, posted the biggest price advance in December among the 70 cities monitored, with values rising 43 percent from a year earlier. That’s followed by 36 percent gain in Haikou, the capital city of the island province.
Guangzhou, capital of south China’s Guangdong province, and Quanzhou, a city in Fujian province, reported the smallest prices gains among the 70 cities, each rising 0.4 percent in December from a year earlier.
“The growth slowed because developers didn’t dare to raise prices in fear of more government curbs,” said Jinsong Du, head of property research for Credit Suisse Group AG. “Many developers launched more homes in the market last month to meet their annual sales target.”
Further Price Gains
Today’s numbers came after private data indicated higher sales in December. SouFun Holdings Ltd., the country’s biggest real-estate website owner, said home prices in 100 cities it monitors advanced 0.9 percent in December from November, the biggest gain for at least six months.
China’s land sales climbed to 2.7 trillion yuan in 2010, Land and Resources Minister Xu Shaoshi said on Jan. 7. China needs to push its land reforms because local governments are becoming more reliant on the sale of these sites to generate revenue, leading to social conflicts, he said.
China Vanke said revenue jumped 71 percent last year to 108 billion yuan, becoming the first developer in China to exceed sales of 100 billion yuan, a target it earlier set for 2014. Shanghai-based Shimao Property Holdings Ltd. said 2010 sales rose 34 percent to 30.5 billion yuan, and set a target of 36 billion yuan for this year.
The government will impose further curbs on loans to developers after it raised interest rates last year, according to Du. “Developers will have to sell a lot of homes for cash flow,” he said.
Shanghai’s Taxes
Shanghai, China’s financial center, will this year prepare for a trial property tax, becoming one of the first cities in the nation to introduce the measure aimed at curbing speculative investment. Mayor Han Zheng announced the move in a speech to the Municipal People’s Congress yesterday, without giving details of how much the tax would be or when it would be implemented.
Shanghai and southwestern Chongqing are the two cities that will begin trials of a property tax, according to a Jan. 10 report by Nomura Holdings Inc., which expects China to selectively introduce a tax rate of about 0.8 percent.
--Bonnie Cao, Zheng Lifei, Jiang Jianguo. Editors: Linus Chua, Malcolm Scott.
To contact Bloomberg News staff for this story: Bonnie Cao in Beijing at +86-21-6104-3035 or bcao4@bloomberg.net
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