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China hardens rein on home bubble, prices to come down

By Wen Sheng (People's Daily Online)

08:37, August 19, 2011

Prices of newly-built and second-hand homes stopped elevating in most Chinese cities in July, official statistics say, effectively removing one of the biggest risks periling the world's second largest economy.

Ever since the burst of sub-prime mortgage crisis in the United States in 2008, China's central government has made moderating equity prices a key task, as history shows, time and again, housing bubbles not reined in by governments will wreak havoc in economy. The lessons from Hong Kong, Japan and now the United States are too avid and heart-wrenching for the Chinese top leadership.

New home prices, excluding affordable housing that are being built by the governments at all levels in China, either fell or remained unchanged in 31 out of 70 major cities across the country, the National Bureau of Statistics said yesterday. That compared with a fall or no change of prices in 26 cities in June, 20 in May and 14 in April.

In Beijing, Shanghai and Guangzhou, where macro-control measures such as home purchase restrictions have been rigorously enforced, new home prices were unchanged from a month earlier. They had climbed 0.1 percent in June and 0.2 percent in May.

The Cabinet's most stringent measure to control housing price rises is the administrative order of sale restriction. The policy, meted out earlier this year, rules that an urban household could only purchase two homes, while migrant workers from other places are restricted to buy only one.

"With existing measures to cool down the country's housing market remaining in place, the central government's efforts since late January to combat soaring home prices and fight asset price bubbles have been affecting the market in a way it had hoped, " The Shanghai Daily quoted Tony Chen, general manager of China Real Estate Information Corp's research center, as saying yesterday.

"With further tightening measures, such as extending government restrictions on home purchases to more smaller cities, we certainly expect to see a cool-down sign in more cities around the country."

Chen said an anticipated list of second and third-tier cities where restrictions on house purchases might be imposed should be released as early as possible to send a signal to the market that the government is determined to fight property speculation.

Some experts say that China still faces a daunting job to drag down housing prices. On a year-on-year basis, only Sanya in Hainan Province recorded a decrease in new home prices last month, compared to three cities in June. In the existing home market, prices fell in four cities, compared to five in June.

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