China’s home prices rise at fastest pace in two years

Bloomberg

China’s home prices rose at the fastest pace in almost two years in August, adding to the likelihood of more government tightening in the housing market.
New-home prices gained 1.49 percent from the previous month, according to Bloomberg calculations based on data for 70 cities released by the National Bureau of Statistics.
That compared with a 1.2 percent increase in July. It was the sixth straight monthly acceleration.
The government is likely to maintain property curbs on fears that any relaxation will lead to another round of price surges, Haibin Zhu, the chief China economist at JPMorgan Chase & Co., said ahead of the data. Officials are seeking to keep housing affordable and limit the risk of destabilising bubbles. “The government worries a lot,” Zhu said. “At this stage, there’s no intention to relax the housing tightening.”
Despite this year’s price gains, China’s developers are the gloomiest in eight years, weighed down by a squeeze on financing, a looming property tax and home-purchase curbs, according to a sentiment index compiled by Standard Chartered Plc.
Some builders are offering free luxury cars and hefty discounts to speed sales.
Of the 70 cities, the biggest month-on-month price increase in August was a 3.4 percent gain in Wuxi, the data show. In Beijing prices were unchanged; in Shanghai, they were up 0.1 percent.
For JPMorgan’s Zhu, the biggest worry in the housing sector is the diminished role of market forces in pricing and sales, as the government’s “temporary” administrative restrictions become permanent.