China’s housing inflation last month hit its lowest level this year, a victory for Beijing’s campaign to ward off property bubbles as it eases monetary policy to ensure a soft landing.
The average price of new homes rose 2.2 percent last month from a year ago, the weakest rise so far this year, according to calculations based on the latest official data published yesterday. Home prices rose 2.8 percent in October.
A Reuters weighted index, based on data released by the National Bureau of Statistics, showed that average new home prices in China fell 0.2 percent last month from October, for the second month in a row.
The bureau, which tracks home prices in 70 major cities, stopped providing a nationwide home price index in January.
The falling home price, in tandem with a sharp ease in China’s consumer inflation last month from July’s three-year peak, enables Beijing to tilt its policies more toward safeguarding economic growth, away from its top priority of calming inflation just a few months ago.
However, analysts expect no let-up in Beijing’s fight against property speculation as top officials have vowed to drive housing prices back to “reasonable levels.”
“The correction has neither reached the government’s satisfaction nor the extent seen last time,” said Hui Jianqiang, research head of property consultancy E-House China, referring to a brief, but sharp, property market downturn during the 2008 to 2009 global financial crisis.
The bureau said new house prices rose 1.3 percent in Beijing last month from a year ago, the lowest since July 2009. They were up 2.4 percent in Shanghai, the lowest in five months.
New home prices fell in four cities, including Ningbo, Wenzhou, Haikou and Nanchong, last month from a year ago, while they fell in only two of 70 cities in October.
In month-on-month terms, new home prices dropped in 49 cities last month, up from 33 in October. They remained flat in 16 other cities and rose in the remaining six cities.
Worried about a rebound in home prices, China’s leaders vowed this week to continue tightening steps in the property sector, including home purchase restrictions, curbs of onshore and offshore fundraising options for developers and higher downpayments for multiple home buyers.
“China will stick to property tightening policies, push home prices back to a reasonable level and speed up construction of ordinary commercial homes to increase effective supply,” they concluded at the annual Central Economic Work Conference on Wednesday, which laid out a blueprint for the country for next year.
Beijing unveiled a massive stimulus package and encouraged home buying in late 2008 to counter the impact of the global financial crisis, which led to a sharp rebound in housing inflation in the middle of 2009.
This time around, history will probably not repeat itself.
“A sudden rebound is unlikely this time. Otherwise, it will greatly harm the government’s credibility,” Hui said.
However, some analysts expect banks to extend more mortgage loans and lower mortgage rates because Beijing has started to fine-tune policy to prevent a sharp slowdown in growth amid the global economic malaise.
China cut banks’ required reserves on Nov. 30, earlier than market expectations, and its first such move in three years.
An increasing number of cities have vowed to extend restrictions on home purchases when they expire at the end of this year.
In contrast, some banks have lowered mortgage rates for first-time home buyers, charging benchmark rates rather than asking for a 5 percent to 10 percent premium as done previously, alongside a prolonged application period, according to domestic media reports.
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