Rising China Home Prices Raise Fresh Restriction Concerns

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By Prasanth Aby Thomas | February 22, 2013 4:19 PM EST

China's new home prices continue to rise in January

New home prices in most Chinese government-tracked cities rose in January, sparking fresh concerns that authorities could resort to stronger restrictions to cool the sector.

According to the data from the National Bureau of Statistics, 53 of the 70 cities covered by the officials reported increase in prices, compared to the 54 in the previous month. Ten cities posted price decline.

The data comes after the government insisted that cities with extreme price rise should ensure that the property purchase restrictions are enforced, if not done so already. China is also looking to extend its pilot property-tax programme to more cities while asking local authorities to release price targets.

The government had stopped short of introducing fresh measures to ease the conditions, but the latest data has given rise to speculations on government's response. Fears of property curbs had hit financial markets in China and Hong Kong in the recent weeks.

Over the past three years, the government has tried various measures to curb the prices, including increasing down-payments and mortgage mandates, introducing taxes for the first time in Shanghai and Chongqing and imposing home-buying curbs in about 40 cities.

Speaking to Bloomberg, Nicole Wong, a property analyst at CLSA Asia-Pacific Markets noted that price gains are an issue especially in major cities and some second-tier cities.

"We'll have some more tightening, but this time around the tightening will be quite selective," aimed at a few cities, she added.

But the authorities themselves appear less concerned on the conditions. In a separate report Liu Jianwei, a senior statistician at the NBS downplayed the price rise fears.

"With the government's property measures being effectively implemented, the upward home price pressure seen starting from the fourth quarter of last year is expected to fade and there is no basis for home prices to experience an overall big rebound," Liu said.

 The property sector is a major driver in China's expanding economy, directly influencing about 40 other sectors. Maintaining a balance between price rise and growth is important for the government as it seeks to push the economy out of its worst annual growth in about 13 years.

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