KUALA LUMPUR: The price of China’s residential and commercial real estate in 70 cities rose 11.7% in March from a year earlier, according to foreign news reports that cited data from China’s National Bureau of Statistics leading to a fall in the number of new mortgages in one of the world’s largest economy.

News reports said the increase indicates that more drastic measures are needed in the midst of concern that a bubble may occur in the country’s housing market, adding that China has raised mortgage rates and re-imposed a sales tax on homes in the first two months of the year to reduce such risks.

ShanghaiDaily.com reported that the number of new individual mortgages in Shanghai kept falling in March as homebuyers sat on the sidelines while the lenders tightened credit.

The daily website quoted Shanghai’s headquarters of the People’s Bank of China saying that banks in the city had extended 5.15 billion yuan (RM2.41 billion) worth of individual mortgages in March, which is a drop from the 2.71 billion yuan extended in February.

"Individual mortgages fell because of fewer transactions and tighter mortgage policy," the bank said.

Beijing has announced in March that developers would have to pay a higher deposit for land purchases and has banned banks from lending to builders who were found to be hoarding land or holding back home sales in anticipation of higher prices, agencies reported.

Meanwhile, ShanghaiDaily.com said home buyers chose to wait this year as authorities stepped up efforts to cool bullish real estate market, with higher taxes and stricter mortgages policies. Even the banks have raised interest rates, down payments and credit worthiness criteria.

“Home transactions dropped but property prices kept rising, though at a slower pace compared with the soaring momentum in late 2009,” the website wrote.

A hedge manager, James Chanos told news agencies that the property market in China is in a bubble that may burst as early as this year, saying that China is "on a treadmill to hell".

"They can't afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing," Chanos added.

Meanwhile, a Hong Kong-based analyst at Nomura Holdings Inc said home prices in China may continue to rise between now and September due to a shortage of supply.

He said some developers were sceptical about the price increases last year and decided to cut back on construction until the fourth quarter, causing a reduction in supply in the market that has led to "whatever the developers are putting out, people are grabbing".

He added that while home prices may cool in the fourth quarter, values may still rise 15% for the full year.