China property prices rise at record pace, seen easing

BEIJING: Property prices in China's major cities rose by their fastest clip on record in April, but analysts said the government's latest crackdown on speculation could slow further gains in coming months.

Soaring home prices, combined with a pick-up in the broader consumer price index to an 18-month high, highlight challenges facing Chinese policymakers as they struggle to contain asset bubbles and inflationary pressures as the economy booms.

But analysts said property inflation, at least, will likely ease over the summer after a flurry of government steps in recent weeks to discourage speculative buying.

"From what we've seen, the number of transactions are already plummetting due to the government's latest property measures," said K K Lai, southern China chief executive of property services firm Centaline.

“At the rate we're going, we're likely to see the rise in urban property prices easing to the single digits in the next couple of months on a year-on-year basis," Lai said.

Nationwide, property prices in 70 cities rose in April by an average 12.8% from a year earlier, higher than the annual 11.7% increase in March and the fastest pace since the National Bureau of Statistics began to put out monthly figures in July 2005.

On a monthly basis, prices rose 1.4%, higher than 1.1% rate in March and the quickest pace since December, when the monthly increase was 1.5%, the bureau said on Tuesday, May 11 on its website, www.stats.gov.cn.

However, many analysts say the way the index is compiled seriously understates the degree of property inflation in China.

The April data marked the 11th consecutive month of year-on-year rises after seven months of declines.

Real estate investment in the first four months of the year increased 36.2% compared with the same period last year.

Some analysts and officials said a slew of measures introduced in mid-April, including raising down payments and mortgage rates for second homes, would likely have a bigger impact in coming months.

Lai said the number of transactions in China's first-tier cities had fallen sharply. In the first 10 days of May, transactions plunged 80% from a year earlier in

Shanghai, and 90% in Beijing and Shenzhen, he added. "The measures to cool down the property market has produced some initial impact and the overly fast-rising property price rises have been curbed," Sheng Laiyun, spokesman for the National Bureau of Statistics, said at a briefing.

Some analysts said that if prices failed to ease for the rest of the year, there was still a possibility of the government introducing a controversial property tax on a trial basis.

"A property tax trial will weigh heavily on market sentiment," Song Li, an analyst with Huatai United Securities in Shanghai.

Flurries of anti-speculation measures and fears of more aggressive policy tightening by Beijing have already made stock markets in Shanghai and Hong Kong the worst performers in Asia so far this year, with shares of property developers among the hardest hit.

As China's economic growth accelerates at double-digit levels, the government has been increasingly concerned about inflationary pressures, and the risks of social unrest due to rising home prices.

Consumer prices rose 2.8% in the year to April, topping forecasts for a 2.7% rise and the biggest move since October 2008, other data showed on Tuesday, May 11.

Residential costs, which cover mortgage payments, rent, building materials and utility charges, now make up 15% of the consumer price index (CPI), with the government planning to increase the weightage.

While China has taken largely modest steps in recent months to slowly brake its rapid growth, economists believe it will have to raise interest rates at least once later this year to curb mounting price pressures, and will likely allow its yuan currency to appreciate. -- Reuters