China prices defy Beijing's curbs

BEIJING: Beijing's tough measures to curb demand in China's buoyant property market have yet to affect prices. Some home seekers and market watchers think they will continue rising.

A recent study by real estate agency Knight Frank found a 2.9% increase in the average price of new homes in 10 major Chinese cities, from September to October, despite increases in benchmark interest rates during the period.

"On the price front, only Hangzhou saw a slight month-on-month price drop, while prices continued to rise in other cities, demonstrating that the new measures have yet to have a significant impact on prices," noted Knight Frank.

Sales in second-tier mainland cities were the least affected by the new tightening policy, it said; Wuhan had the largest monthly price gain, 9.2%, for new homes. Prices in Beijing and Tianjin were up 4.6% and 4% respectively.

The volume of purchases increased in most major cities, except Beijing and Hangzhou. In Guangzhou, the number of deals in October was almost 50% higher than in the previous month, and sales in Chengdu jumped 37.7%.

"The new round of policy tightening is aimed at curbing home purchases for investment purposes," Knight Frank said. "In first-tier cities, where significant proportions of buyers are investors, transaction volumes have been markedly dampened by the policy, whereas in second-tier cities, where the majority of buyers are end-users, sales have been less affected."

Beijing's tightening measures included an increase in benchmark interest rates by the People's Bank of China on October 20, followed by an increase in the reserve ratios that banks are expected to maintain, and two mortgage rate increases.

In addition, the China Securities Regulatory Commission suspended rights issues by listed real estate developers, while many commercial banks have reduced the credit that can be extended to developers.

But home seekers in Wuhan, Hubei province, maintained their confidence in the property market. Typical of prospective buyers was Hawk Guo, 33, and his wife, who visited the sales office of developer Poly (Hong Kong) Investments to inquire about the new flats it is selling at Poly Royal Palace on Saturday, Dec 4, when 162 flats went on the market.

Guo, who is considering buying a second home, said the average flat prices of between 7,000 yuan and 9,000 yuan (RM3,306.61 and RM4,251.35) per square metre in Wuhan were not too high compared with other cities. "When hot braised noodles are also getting more expensive, home prices will not drop too much. In inflationary times it's not a good option to put money in the bank... and gold prices have surged too much already."

Yang Haibin, 26, who also visited the sales office, said three of his colleagues were also thinking about buying flats now. "Because the site is next to the metro station and the railway is expected to be completed by 2013, prices will rise."

Michael Zhou Jianghui, deputy general manager at Poly's Hubei office, said at least 22 flats, ranging in size from 196 to 311 square metres, had been sold after the launch for a total of 46 million yuan. The latest deals were not closed as quickly as in previous launches because prices and flat sizes were larger this time, Zhou said.

Poly expects its annual sales target on China to grow by 80% in a year to some 18 billion yuan next year, while the average selling price per square metre will rise from the current amount of 7,400 yuan to 8,500 yuan next year.

Albert Lau Tak-yeung, director of Savills Shanghai, said rapid economic growth and urbanisation — particularly in fast-growing second-tier cities — would continue to drive domestic demand. Other favourable factors included limited financial investment channels, a high national savings rate of around 40%, and inflationary pressure. — South China Morning Post
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