China home price rises gain speed, defy purchase curbs

Bloomberg

China home prices rose last month in more cities despite increased restrictions on property transactions by local authorities.
New home prices, excluding subsidized housing, gained in February in 56 out of 70 cities tracked by the government, compared with 45 in January, the National Bureau of Statistics said Saturday. Prices climbed in 67 out of 70 cities from a year earlier, compared with 66 in January.
To cool the market, Beijing city raised down-payment requirements for second homes 10 percentage points to between 60 percent and 80 percent. The rule also applied to buyers who don’t currently own a home but previously had a mortgage with the same down-payment threshold, making it harder for someone to sell their house to upgrade to a bigger or more expensive property.
Southern export hub Guangzhou, coastal Qingdao and Nanjing in the southeast have also tightened measures. Changsha, the capital of inland Hunan province, joined the ranks on Saturday after the home price data release.
“The government intends to pause the surging home prices, and let them walk steadily up later,” said Xia Dan, a Shanghai-based analyst at Bank of Communications Co., adding that if curbs on demand are lifted, prices will rise further. “The government doesn’t want the prices to run all the time and ferment bubbles.”
China’s biggest cities have seen a round of home price surges in the past year. In Beijing, new home prices rose 24 percent in February from a year earlier, while Shanghai saw a 25 percent gain. Shenzhen prices increased 14 percent in the same period.
“Beijing’s tightening will have a short-term effect to stabilize the market, but the power of policy has become increasingly weaker,” Zhang Hongwei, a research director at Shanghai-based Tospur Real Estate Consulting Co., said Friday, adding more local tightening may follow.
Braking measures to counteract soaring home prices in eastern China’s largest cities appear to be diverting demand to smaller ones, Bloomberg Intelligence analysts Kristy Hung wrote in a note this month.
The value of new homes sold rose 23 percent to 912 billion yuan ($132 billion) in January and February compared with the first two months of 2016, according to National Bureau of Statistics data released Tuesday. Sales rose 17 percent in December, the last time the data was released.
“Sales were a lot stronger than expected,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “Buyers in third- and fourth-tier cities chased gains, eyeing similar price surges in top cities.”
The surge comes after top policy makers used this month’s National People’s Congress to reiterate a pledge to curb property speculation, and some local governments expanded home-buying restrictions. New banking regulator Guo Shuqing has said he will pay close attention to real estate bubbles, after 45 percent of new loans in China last year went to the property sector, with most going to personal mortgages.