China home prices continue to rise amid market-based reform hopes

Home prices in major Chinese cities continued to rise in October despite the government's persistent efforts to cool the property market, official data showed on Monday. Of a statistical pool of 70 major Chinese cities, 65 saw month-on-month rises in new home prices in October, and 62 reported price gains in existing and second-hand homes, the National Bureau of Statistics (NBS) announced in an online statement. The pace of growth in new home prices averaged 0.7 percent on a monthly basis, slowing 0.2 percentage points compared with that in September as developers ramped up supplies to meet growing demand during the traditional sales season and the government tightened price regulations, said senior NBS statistician Liu Jianwei. "Some cities have tightened price approvals on certain projects, which helped contain the month-on-month rises," Liu said in a statement. On a yearly basis, all the cities except Wenzhou reported gains in new home prices. First-tier cities continued to lead rises last month, with the prices of new homes in Beijing and Shanghai surging over 20 percent from a year ago, while prices in most second- and third-tier cities expanded at a more tempered pace, according to the NBS, which attributed the drastic growth partly to a low comparison base. Driven by rapid urbanization and speculation, China's property market has taken off in recent years and become a major headache for the authorities as more people are priced out of the market. The traditional Chinese mindset of viewing home ownership as a precondition for forming a family has guaranteed that demand in cities such as Beijing and Shanghai, which attract thousands of newcomers each year, will keep climbing. With other investment channels, such as the stock market, proving disappointing, houses in those cities have become a popular investment choice for the country's wealthy, further squeezing the already tight supplies. Over the years, in response to growing public complaints, the central government has tried to rein in prices by creating purchase restrictions and experimenting with property taxes, resulting in short-lived cooling of the market. After a while, prices have generally rebounded. Friday's data came amid hopes that the government may seek a more market-oriented mechanism to build a healthy property market following the reform decision publicized last week by the Communist Party of China Central Committee. China will step up legislation of property tax, build a unified market for urban and rural construction land to increase supply, and set up a housing database, according to the decision, which vowed decisive results by 2020. "Although the decision has not directly mentioned home prices, the problem will be gradually resolved as the market-based reforms mentioned in the decision filter through," said Zhu Zhongyi, vice president of the China Real Estate Industry Association. However, Zhu also cautioned of challenges ahead, although the reform direction is clear, as the property markets in cities such as Beijing and Shanghai are very complicated. "The key is to secure a proper transition from the current control measures to the proposed long-term mechanism while taking regional differences into consideration," he said.