China’s home prices fell for a fourth month last month as the government prolonged a crackdown on speculation that risks deepening the slowdown in the world’s second-biggest economy.
Property values dropped 0.25 percent last month from November, SouFun Holdings Ltd (搜房網), the nation’s biggest real-estate Web site owner, said yesterday. Prices slid in 60 of 100 cities, and all of the 10 biggest, including Beijing and Shanghai.
Average home values nationwide climbed 2.9 percent last month from the same month in 2010 to 8,809 yuan (US$1,400) a square meter, the slowest year-on-year growth since August, SouFun said.
Chinese Premier Wen Jiabao (溫家寶) said business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed, in a statement released on Tuesday. Barclays Capital and Bank of America Merrill Lynch say lenders’ reserve requirements may be cut before a week-long Lunar New Year holiday starts on Jan. 23.
“China’s economy is still on a downtrend and the next reserve ratio cut may come as early as this week,” said Kevin Lai (賴志文), a Hong Kong-based economist at Daiwa Capital Markets. “More liquidity is needed in running up to the Chinese New Year holiday and to provide funds for companies that may face more difficulties in coming months.”
China is shifting focus to supporting growth rather than damping inflation as Europe’s debt crisis threatens to curb exports. A cut in banks’ reserve requirements, the proportion of deposits they are required to set aside, was the first since 2008.
“We see downside pressure on our economy and elevated inflation at the same time,” Wen said during a two-day trip to Hunan Province, according to a statement on the government’s Web site on Tuesday. “We also face problems of weakening external demand and rising costs for companies.”
The government said last month at an annual economic planning meeting that it won’t back away from real-estate industry curbs this year that are damping home sales and pulling down prices. The nation’s financial center of Shanghai and some other Chinese cities have also said they would continue to impose home-purchase restrictions this year.
The government has said it would continue to increase supplies of social housing by setting the target of starting 7 million homes this year, compared with 10 million last year. The completion will at least keep pace with last year’s 5 million units, the People’s Daily reported yesterday.
Inflation in China eased to 4.2 percent in November last year from a year earlier, the slowest pace in 14 months. Even so, price gains exceeded the government’s target last year of 4 percent every month in the first 11 months of the year.
China’s money supply has “structural issues” and one can’t simply say that there is too much or too little lending or sufficient or insufficient liquidity, Wen said. The government would tighten or loosen policies according to the needs of different industries, he said.
China would continue to focus on rebalancing growth, restructuring the economy and increasing consumer and investment demand to support the “real economy,” he said.
“Priority will be given to key projects and projects under construction and we will limit industries suffering from overcapacity, those that cause heavy pollution and are energy intensive,” Wen said, reiterating existing government policy.