Property prices in China fall as curbs bite

BEIJING: Chinese property prices in June recorded their first monthly fall since February 2009, providing further evidence that a government drive to let the air out of an inflated market is working.

Average prices in 70 cities edged down 0.1 per cent from May, lowering the annual property inflation rate to 11.4 per cent in June from 12.4 per cent in the year to May and April's reading of 12.8 per cent, the National Bureau of Statistics said yesterday.

Coming on the heels of much slower import growth and a controlled moderation in bank lending, the figures reinforced the conviction of many economists that no further policy tightening is on the cards.

However, with surprisingly resilient exports offsetting softer domestic investment, the consensus is that Beijing will not be rushed into relaxing policy either until clearer signals emerge from the all-important property and construction sectors.

A prominent developer said China will not relax its property tightening policies any time soon and home sellers will face more pressure to cut prices in the third quarter,

Ren Zhiqiang, the outspoken chairman of Huayuan Property, cast doubt on the potential for any imminent change.

"The current policy will last for a pretty long period of time," he told a forum. "The government will not lightly ease policy."

"Currently the Chinese property market's at a crossroads. It's a game of who blinks first," said Dong Tao, chief China economist at Credit Suisse in Hong Kong.

"This is a turning point of the overall property price trend," Yang Hongxu, a Shanghai-based analyst with E-House China R&D Institute, said.

"The decline will continue for several months once the trend is consolidated - probably lasting into the end of this year or the beginning of next year," he said.

Chinese authorities have issued a slew of measures in recent months as they seek to prevent the property market overheating and causing a bubble that could derail the world's third-largest economy.

The authorities have so far tightened restrictions nationwide on advance sales of new developments, introduced curbs on loans for third home purchases and raised minimum down-payments for second homes.

Chinese media reports have said a property tax could be imposed on a trial basis in Beijing, Shanghai, the southwestern mega-city of Chongqing and the southern city of Shenzhen.

Qin Hong, a senior researcher at the housing ministry, said China would impose the tax "at an appropriate time" as a "long-term measure" to regulate the sector, the official Securities Times reported yesterday.

China currently has no such levy on residential property but does impose a 1.2 per cent tax on 70-90 per cent of the value of commercial real estate.

By Reuters, AFP