Home prices still rising, but slowdown expected amid tight liquidity

The average home prices in major Chinese cities surged in June year-on-year, helped by strong demand and increasing sales, an independent property research agency said Monday.

But the current tight liquidity may restrict banks' offers of mortgage loans and restrain the rising momentum in the short term, analysts said.

Home prices in 100 major cities rose by 7.4 percent year-on-year to an average of 10,258 yuan ($1,672) per square meter in June, compared with a 6.9 percent year-on-year rise in May, according to data released Monday by the China Index Academy.

It was the seventh consecutive monthly rise year-on-year, but the month-on-month price rise narrowed to 0.77 percent in June from the 0.81 percent gain in May.

"Due to the uncertainty over the economy, tight monetary liquidity and an increased supply of new homes in many cities, the price increases will continue to narrow," the academy said.

Media reports last week said that some commercial banks had suspended mortgage lending approvals at the end of June after China's money market rates, a key gauge of liquidity for the country's banking system, shot up to a record high on June 20.

"The recent inter-bank liquidity problem may slow down the banks' approval of mortgage loans. Home sales will be flat in July," Zhang Haiqing, director of Centaline Property Research Center in Shanghai, told the Global Times.

"But the impact of the liquidity problem on the property market is transient. Demand for homes is still strong and the fresh measures by local governments to curb the property market have been less stringent than expected," Hui Jianqiang, head of research at Shanghai-based E-house China Research and Development Institute, told the Global Times.

In March, local governments in major cities including Beijing, Shanghai and Guangzhou rolled out detailed regulations to cool down the housing market, but the effects were less obvious than expected.