China places firmer lid on home prices

15:24, April 18, 2011      

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China's harsh measures to cool down a torrid pace of home market has shown rising signs of success, as more Chinese cities reported a stagnation or a decline in their home prices in March.

Market analysts say their China's monetary tightening to tame inflation – by consistently raising banks' required reserve ratios and interest rates – will put a firmer lid on home price acceleration.

Sequentially, prices of new homes in 12 cities dropped last month, while prices in 8 other cities, including Beijing and Shenzhen, stood unchanged. About 30 cities posted marginally small monthly price rises.

And, 16 cities, including Beijing, Guangzhou, Xi'an, Chengdu and Wu'han, reported second-hand home price drops in March, up from only 4 cities in February, the National Bureau of Statistics reported Monday.

Government officials and economists, emboldened by the numbers, have claimed that the government's stringent tightening policies to control housing bubbles are reaping fruits, finally. Beginning this year, the government ordered 50 major cities to restrict the number of homes people are eligible to buy.

In Beijing, Shanghai, Guangzhou and Shenzhen, an urban household could only purchase two homes, while non-permanent residents are restricted to buy only one, in an effort to prevent property hoarding and speculation.

Increasingly, the measure has led to a considerable tapering-off in frenzied home sales. And, some market analysts are predicting a delicate balance has been stricken. In the coming few months, a further dry-up in home transactions are expected to lead to steeper cuts in prices.

As required by the State Council, China's central government, cities including Beijing have promulgated their yearly targets of home price macro-control. China's capital city said it would try its utmost to “stabilize and even reduce” its home prices by the end of 2011.

Beijing and other Chinese cities are also planning to spend tens of billions of yuan over the next few years on building affordable housing.

The country's property market control goes hand-in-hand with its fight against elevated inflation, which rose 5.4 percent year-on-year in March. The government has tightened restrictions on bank lending by raising banks' required reserves four times, and raising interest rates on deposits and loans twice this year.

Inflated home price since 2009 has caused widespread complaints from the public. The average apartment in central Beijing and Shanghai now costs about $500,000, Even in second-tier cities like Chengdu and Wu'han, in central China, the price of a typical home costs about 25 times the average annual income of residents.

By People's Daily Online
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