Economy

China's housing prices grow slower in June

(Xinhua)
Updated: 2010-07-12 10:44

BEIJING - Housing prices in major Chinese cities rose 11.4 percent year on year in June, one percentage point lower than the increase in May, the National Bureau of Statistics (NBS) said Monday.

This was the second consecutive month that China's property prices grew at a slower pace. Property prices in the 70 large- and medium-sized cities grew 12.4 percent in May, 0.4 percentage points lower than that of April.

On a monthly basis, June property prices in these cities fell 0.1 percent compared to the month before, the NBS said.

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The slower increase in property prices indicated China's policies to tame the property market were taking effect, said Zhou Jingtong, an analyst with the Bank of China.

Current policies, if maintained, would continue to cool property prices next month, Zhou said.

The Chinese government started a campaign in April to rein in soaring house prices and curb speculation, including tightened scrutiny of developers' financing, limited loans for third-home purchases, and higher down-payment requirements for second-home purchases.

The government should not withdraw these policies because of concern that the property market downturn would drag down economic growth, he said. "A relaxation will make all the previous efforts wasted."

New home prices rose 14.1 percent year on year in June, down one percentage point from May. Prices of second-hand homes gained 7.7 percent last month, compared with an increase of 9.2 percent in May.

Home sales by floor space was up 15.4 percent to 394 million square meters in the first six months this year. The growth was compared with an increase of 22.5 percent in the January-May period.

Although home prices still climbed in Beijing and Shanghai in the first six months, sales in the two cities fell sharply from a year earlier, by 31.5 percent and 35.8 percent respectively as the cities witnessed the steepest decline in home sales among all the 70 cities.

Investment in real estate development rose 38.1 percent to 1.97 trillion yuan (US$291.68 billion) in the first half of this year.

Investment in real estate development was likely to see a sharp fall if current policies were maintained as property developers would cut investment if their profits dropped because of sales decline, Ha Jiming, chief economist at China International Capital Corp., said in a note to clients.

In 2009, property development investment was up 16.1 percent year on year -- accounting for more than 16 percent of China's annual fixed asset investment last year.