Despite continued curbing policies, more cities saw a rise in house prices in October than in September, the National Bureau of Statistics (NBS) said Sunday, and this trend of slight growth is likely to continue as policymakers are reluctant to make big changes that might destabilize the economy, market analysts said Sunday.
Among 70 major cities tracked by the NBS, 17 saw price falls in October compared with 24 in September. And housing prices in 35 of the 70 cities rose in October, four more cities than in September, though the average price rise was less than 0.5 percent, the NBS said in a statement on its website.
The official statistics show that prices of new homes in first-tier cities such as Beijing, Guangzhou and Shenzhen increased in October from September, and are 2.8, 4.7 and 2.6 percent higher, respectively, than in the same period of 2010, the year when policymakers began setting restrictions on house purchases to cool the overheating real estate market.
Second-tier cities such as Chongqing and Xi'an also saw slight price rises in October, and prices in the two cities are 4.9 and 3.3 percent higher, respectively, than in October 2010.
Despite the curbing measures, such as a rise in down-payments for second and third homes, "the housing price cannot fall (substantially in first- and second-tier) cities even though the demand has been suppressed," Yin Kunhua, a professor at the Real Estate Research Centre of Shanghai University of Finance and Economics, told the Global Times.
As a result of the curbing policies, property developers have had difficulty in getting bank loans and tight cash flow made them turn to trust funds, which charge 5-8 percentage points more than the interest rates banks charge on loans. This cost will be passed on to consumers, said Yin.
The rising funding costs coupled with increasing land prices and taxes together account for about 85 percent of the price of an apartment in downtown Shanghai, he said.
Many small and medium-sized property developers have been forced out of the sector, so the market is now dominated by a powerful group of large listed property developers like China Vanke and China Poly Group Corp, who pursue higher returns by building higher-end homes, he said.
Second-hand house prices have been rising since March, albeit with growth of less than 1 percent since then, said Liu Yuan, research director at Centaline China Real Estate.
"The trend will not change within a short period of time," unless there is a big change in policies such as promulgation of property taxes nationwide and canceling of property presales, Liu told the Global Times.
Liu noted that policymakers tend to be cautious as they want to prevent a bubble in the housing market but also want to avoid a sharp decline, as both would be detrimental to the fragile economy.
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