New home prices continue to rise

New home prices in China's 100 major cities rose for the 12th consecutive month in May, and a further price rise is highly possible mainly due to rising land prices, the China Index Academy (CIA) said Monday.

The average price of new homes in the country's 100 biggest cities increased 0.81 percent month-on-month to 10,180 yuan ($1,659) per square meter last month, down 1.09 percentage points from April, the CIA said in a monthly report.

Among the 100 major cities, 77 saw home prices increase on a monthly basis, compared with 76 in April.

Meanwhile, 22 cities experienced a price drop, compared to 24 in the previous month, according to the CIA.

Xiamen, a tourist destination in East China's Fujian Province, saw a 3.55 percent month-on-month increase in the city's average home price, the highest increase among the 100 major cities, while Xi'an, capital of Northwest China's Shaanxi Province, ranked last with a monthly price drop of 1.75 percent.

Average new-house prices in 10 key cities, including Beijing and Shanghai, rose 1.05 percent on a monthly basis to 17,202 yuan per square meter, the CIA said.

With government tightening measures continuing to take effect and lower home sales volumes in May, the growth rate of average home prices continues to shrink nationwide, the academy said.

However, China's land market has shown signs of heating up, raising market expectations that home prices will continue to rise.

"Expectations for a further rise of home prices remain strong, given rising land prices, home supply shortages in key cities and expectations of looser monetary policy," the CIA said.

Land sales in four top-tier cities - Beijing, Shanghai, Guangzhou and Shenzhen - amounted to 141.2 billion yuan in the first five months of 2013, up 350 percent from a year earlier, the latest data from consultancy Centaline Property Research Center showed.

"Rising land prices will not only increase development costs for property developers and thus boost home prices, but also push up market expectations of a further home price rise," Xie Yifeng, head of the Asia-Pacific Real Estate Association, told the Global Times Monday.

Analysts attribute the booming land market to a better financing situation for property developers, as well as local governments' intention to push up land prices.

Major property developers have become active in land bidding, especially in first-tier cities, as their financing ability has improved this year and they are optimistic about a property market recovery, Zhang Hongwei, research director of Shanghai-based property consultancy ToSpur, said in a research note Monday.

"Local governments depend on land sales to boost their fiscal revenues," said Xie of the Asia-Pacific Real Estate Association.

"They should reduce administrative meddling in land transactions, and let market forces play an important role in land sales," Xie said.