Tightening measures to continue, more affordable units in the pipeline

BEIJING - Property prices registered their smallest year-on-year gains in December, after peaking at 12.8 percent in April, as the central government vowed to continue measures to curb excessive price growth.

Property prices in 70 major cities rose 6.4 percent in December from a year earlier, compared to a 7.7-percent increase in November, the National Bureau of Statistics (NBS) said in an online statement on Monday.

Despite the slowing annual growth rate, property prices in the 70 cities posted their fourth straight month-on-month rise, with the gain in December standing at 0.3 percent.

"There are many factors pushing property prices, such as soaring land prices, a widening income gap and too much liquidity in the market," said Lin Lei, marketing chief of Century 21st, a US-listed real estate consultancy company.

"Though the government's tightening policies have curbed investment-oriented home purchases, other factors are not affected by these policies, so it is not surprising to see growth under such rigorous measures," Lin said, adding that rising property prices will be limited this year.

Since April, the central government has launched three rounds of tightening measures to curb excessive growth in property prices. They include suspending mortgages for third-home purchases, hiking minimum down payments to at least 30 percent, restricting the number of apartments a family can purchase and pledging to speed up pilot programs to levy real estate taxes.

"With the entry of government-subsidized housing in the second half of 2011 and continuing tightening measures, the average annual property price may dip this year," Lin said.

Huang Yu, vice-president of the China Index Academy, a Beijing-based property research institute, said supply mix will affect the property market this year.

"If government-subsidized housing accounts for more than 20 percent of the total market supply, prices in the regular residential sector will be weighed down," she said.

The Ministry of Housing and Urban-Rural Development said the central government plans to provide the market with 10 million units of affordable housing this year, compared to 5.8 million units last year. It is expected that the government will need 1.4 trillion yuan ($211 billion) to build those 10 million units.

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According to the NBS, investment in real-estate development in December rose 12 percent to 557 billion yuan from a year earlier, while full-year investment climbed 33 percent to 4.83 trillion yuan.

Property sales increased 22 percent to 1.02 trillion yuan in December, with 218 million square meters of housing sold, up 12 percent from a year earlier.

"There is no doubt that the government will further tighten control over the property market this year, and we are going to see a big drop in the increase rate of property investment and newly started housing projects," Ren Zhiqiang, chairman of Huayuan Real Estate, told Huaben Real Estate Forum on Sunday.

"We expect floor space sold in 2011 will increase 10 percent to exceed 4 billion sq m, but property price's year-on-year growth rate will largely drop this year," Ren added.

Premier Wen Jiabao said in December that measures to curb the property market were not well implemented and reiterated his goal for prices to return to a "reasonable level" during his term, which ends in 2012.

Lan Chun, chairman of Elite Real Estate Co Ltd, said property developers could still find opportunities as the urbanization process quickens and more city clusters emerge.

The company plans to build a satellite town between Beijing and Tianjin, with an area of 4 million sq m, betting on the opportunities rising from the integration of these two cities.

Yi Xiaodi, chairman of Sunshine 100 Real Estate Group, said property developers should increase their holdings of non-residential businesses and strengthen exploration into the second and third-tier cities to hedge risks.