China home prices fall in January

Downward spiral: A project site in Hefei, China. Home prices continued their slump in China’s major cities as the government said it had no plans to relax policy restrictions aimed at cooling the market. — AFP

BEIJING: Home prices in more than two thirds of China's major cities continued their slump in January from a month before, the government announced, as moves to cool the market continued to bite.

Of 70 cities tracked by the government, 48 saw prices fall month-on-month, slightly fewer than the 52 cities that recorded negative house price growth in December, the National Bureau of Statistics said, while 22 were seen as stable.

Beijing has introduced a range of measures aimed at curbing the real estate market over the last year, such as bans on buying second homes, hiking minimum down-payments and introducing property taxes in select cities.

But analysts worry the correction could have broader implications for the economy, which is already widely forecast to slow this year from 9.2% growth in 2011.

Premier Wen Jiabao reiterated this week that the government had no plans to relax policy restrictions aimed at cooling the market.

Property analysts EC Harris said in a research note that the slowdown was likely to continue, while warning of the risks for the wider economy.

“Property prices in the mid- to long-term will likely continue to decrease as long as the government's current policies remain in place,” the firm said.

“The Chinese government's tightening policies have been effective at reducing fears of a property bubble.”

But the measures “could lead to a cascading' effect that causes the economy to slow down too much”, it added.

China's property market weakened last year, reflected in slower investment and sales, as the government sought to bring down runaway housing prices on fears of a speculative bubble.

In December, China moved to ease credit by trimming bank reserves but the property industry is waiting to see if the government might relax measures aimed specifically at the sector.

China's Renmin University has said the government would likely relax some market curbs in 2012 due to concerns that slumping prices could hurt growth.

Analysts forecast housing prices could fall even further when the measures are eased, as pent-up supply pours into the market.

By AFP