Home prices rising 10.7% in February

09:28, March 11, 2010      

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Boosted by a record sum of bank lending in 2009 and amounting activities of speculation, property prices in February spiked at the fastest pace in almost two years, a phenomenon that increasingly worries China's policy-makers.

Prices in 70 major cities including Beijing, Shanghai and Guangzhou rose 10.7 percent year-on-year in February, the National Bureau of Statistics said Wednesday.

"Despite the government's tightening policies taken in January and February, it will take time for the sizzling real estate sector to cool down, as developers are still awash with cash from last year's sales boom," said Qin Xiaomei, chief researcher with property firm Jones Lang LaSalle Beijing.

Beijing policy makers are now concerned about a growing risk of asset bubbles, accelerating pressure of inflation, and most dreadfully, a possible spike in bad loans for banks, which recalls the September 2008 world financial meltdown.

Premier Wen Jiabao warned of "latent risk" in banks and pledged to crack down on property speculation in a speech to the country's annual parliamentary meeting last week.

The latest numbers "imply that there may be more upward pressure on inflation from the housing component," said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong, the Bloomberg reported Wednesday.

"Social consequences will be negative, making it more likely that policymakers will introduce further and powerful curb measures to cool the over-heated realestate market."

To cool speculation, the government in January re-imposed a tax on homes sold within five years of their purchase, after having cut the taxable period to two years in January 2009 to bolster a flagging economy then.

But run-away prices appear to be gradually losing momentum. Though the year-on-year growth rate in February is 1.2 percentage points higher than January, the month-on-month increase is down 0.4 percentage points, said the NBS.

Shenzhen-based China Vanke Co, the country's biggest developer by market value, said its February property sales fell 35.4 percent to 2.51 billion yuan ($368 million) from a year earlier, the company's first sales decline since March 2008.

Guangzhou R&F Properties Co, the biggest developer in the city, said contracted sales fell 12 percent last month from a year earlier.

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