China’s property prices increased at the second-fastest rate last month, indicating little sign that the government’s crackdown on speculation will work to stop an asset-price bubble.
The 12.4-percent gain compared with the recorded 12.8 percent increase in April 2009, according to the National Bureau of Statistics. The data series, which covers 70 cities, was started in 2005.
The figures, along with the data indicating a bigger jump in exports than the estimate in May, signalled dangers in maintaining stimulus measures adopted in the wake of the global downturn. Concerns that the central government will step up policy tightening, along with the dangers posed by the debt crisis in Europe, has sent the country’s benchmark stock index down 21 percent this year.
"Housing prices continue to grow apace, it appears the government measures so far have only affected the transaction volumes," said Liu Li-Gang, a Hong Kong-based economist of Australia and New Zealand Banking Group. "The government will have to work more to contain the strong demand" for real estate, he added, saying that higher interest rates would be very effective.
Sales in Shenzhen, Beijing and Shanghai dropped nearly 70 percent last month from the previous month, and land sales for residential projects in 70 major cities also dropped 14 percent, according to a report.
An index tracking 34 property companies has dropped almost 28 percent in 2010, the worst performer in five subgroups of the stock benchmark of Shanghai.
Sales by China Vanke, China’s biggest publicly traded real estate developer, slipped 20 percent last month from 2009, and the contracted sales of Guangzhou R&F Properties Co. in May also dropped 48 percent on-year, based on the developers’ stock exchange filings.
The government may impose a trial property tax after tightening sales rules for property developers, restricting loans for multiple-home buyers and raising some down payment requirements, according to sources.
"The government’s recent measures to cool the housing market focus on limiting investment and increasing the supply of public and low-cost housing," stated a report submitted by Barclays economists Peng Wensheng and Chang Jian. "This represents a regime shift in housing policy" and additional measures are likely to come, they added.
Property sales by area increased 22.5 percent during the first five months to 302 million sq m, according to the statistics bureau. The pace is compared with the 32.8-percent increase between January and April. The area under construction increased 72.4 percent from last year to 615 million sq m.
Property sales may drop 30 percent from 2009, said Jing Ulrich, JPMorgan Chase’s HK-based chairwoman of China equities and commodities.