Policies, developers' cuts push housing prices down again

China's home prices fell for a fifth month in January as the government maintained its curbs on the property sector and more developers cut prices to stimulate sales.

According to SouFun Holdings Ltd, the nation's biggest real estate website portal, property prices nationwide fell 0.18 percent last month from December. Prices dropped in 60 of 100 cities tracked by the company, the same as in December, it said on Wednesday.

On a yearly basis, average home prices nationwide climbed 1.7 percent in January to 8,793 yuan (US$1,394) per square meter, the slowest pace of growth since August, SouFun said.

"Since the government has shown its determination to continue its rigorous measures, the first half of 2012 will see deeper price corrections," said Carlby Xie, head of research at the real estate consultant Colliers International (Beijing).

Premier Wen Jiabao reiterated at a meeting on Tuesday that regulators would "continue to strictly enforce" measures to discourage speculation, despite signs that the overheated market had been cooling.

Wen said the government wants prices to return to "reasonable" levels, which was the fifth time he has mentioned that goal within the past two years.

Though some banks have cut interest rates on mortgages for first-home purchases, industry analysts said that wasn't a sign of policy loosening.

"We should not interpret some reasonable fine-tuning as a loosening of real estate policies," said Chen Guang, an analyst with Century 21 China.

Liu Chunyan, general manager of Beijing WorldUnion Properties Consultancy Co Ltd, said there would be further price declines during the first half, and the market might bottom out toward the middle of the year.

"We estimate that home prices could drop 20 to 30 percent on average this year and that the declines will expand throughout the country, including to third- and fourth-tier cities that were less affected last year," Liu said.

Many economists, however, are concerned that a larger-than-expected correction would cause a hard landing for the world's second-largest economy.

According to Stephen Green, chief economist with Standard Chartered Bank PLC, the correction in China's property market is the biggest domestic challenge for the economy this year.

Zhu Haibin, economist with JP Morgan Chase & Co, said in a research note: "When and how to exit the existing housing tightening policies remains one of the biggest challenges for policymakers in 2012."