China must “unswervingly” continue its property controls and prevent prices from rebounding, Chinese Premier Wen Jiabao (溫家寶) said on Saturday, after the central bank cut interest rates and triggered a surge in property stocks.
Local governments that introduced or covered up a loosening of curbs on residential real-estate must be stopped, Wen said during a visit to Changzhou city in Jiangsu Province, according to Xinhua news agency. Restricting speculative demand and investment in property must be made a long-term policy, he said.
Wen’s comments underscore the government’s determination to maintain restrictions on housing purchases even as it cuts interest rates and boosts infrastructure spending to reverse a slowdown in the world’s second-biggest economy. China’s new home prices rose for the first time in 10 months last month, according to SouFun Holdings Ltd (搜房網), owner of the country’s biggest real-estate Web site.
“We must unswervingly continue to implement all manner of controls in the property market to allow prices to return to reasonable levels,” Wen was quoted as saying when he met residents and local government officials in charge of affordable housing.
“We cannot allow prices to rebound, or all our efforts will come to naught,” he said.
Market expectations about property prices are changing and citizens are worried prices will rise again, he said. Signals in the market are “chaotic” and misleading and speculative information must be stopped, Wen said, according to Xinhua.
Shares of property developers listed in China rose the most in four months on Friday, the day after the People’s Bank of China announced the second cut in borrowing costs in a month. The stocks gained even as the central bank’s statement signaled property restrictions will not be relaxed.
The gauge tracking developers on the Shanghai Composite Index added 3.5 percent, the most since March and the biggest gain among five industry groups on the benchmark. China Vanke Co (萬科), the biggest listed developer in China, climbed to the highest since November 2010. Poly Real Estate Group Co (保利地產), the second largest, surged to the highest in two-and-a-half years.
“As long as there are no new curbs to come and it’s only the implementation of existing policies, home prices will still rise,” Jinsong Du (杜勁松), a Hong Kong-based property analyst at Credit Suisse Group AG, said by telephone on Saturday.
Wen called for the government’s differentiated mortgage policy and other restrictions on purchases to be maintained. His comments add to those by the People’s Bank of China on Thursday warning banks to stick to the government’s lending curbs.
“All financial institutions must continue to strictly implement a differentiated housing credit policy to continue curbing property buying for speculation and investment purposes,” it said in its statement announcing the interest rate cut.
China started imposing restrictions on home purchases two years ago as prices surged after the government started a stimulus package to shield the economy from the impact of the global financial crisis. Measures included raising down-payments and mortgage-rate requirements, limiting purchases in some cities and trialing a tax on homes in Shanghai and Chongqing.
Property controls are still in a “critical period” and the task remains “arduous,” Wen said on Saturday. Cases of illegal acquisition of property rights must be investigated, he added.