Govt curbs on property speculation to continue

China's housing ministry said Wednesday that the cool-down of the country's property sector is a result of market-oriented adjustment, stressing that the central government will continue to curb speculative demand in the housing market.

Although some indicators of the property market such as new construction and floor area sales witnessed a year-on-year drop recently, it was mainly due to last year's high base effect, while other indicators are still growing even if the pace is slower, Feng Jun, chief economist at the Ministry of Housing and Urban-Rural Development, told a press conference on Wednesday.

An increasing number of property developers have cut home prices to spur sales in recent months. On May 30, a property developer in Guangzhou, South China's Guangdong Province, cut its house prices to 9,800-12,500 yuan ($1,568-2,000) per square meter from the previous 16,000- 21,000 yuan.

To protest the price cuts by developers, some previous homebuyers blocked the residential entrance to prevent entry of potential homebuyers, Guangzhou Daily reported on Monday.

Latest data from the China Index Academy also showed that the average house price in the 100 cities it monitors fell by 0.32 percent to 10,978 yuan per square meter in May from April, the first monthly drop since June 2012, adding to signs of cooling in the red-hot property market.

However, the ministry said a shortage in China's housing supplies is unlikely to change in the near term, and home prices in some cities will still face upward pressure, according to a statement issued during the press conference.

"Feng's comment refuted market concerns that China's property market will crash or home prices will plummet significantly," Yang Hongxu, deputy director of E-house China R&D Institute, told the Global Times on Wednesday.

Analysts have expressed concerns that the slowing property market will drag down China's GDP growth.

China's real estate investment growth is likely to slow to 14 percent year-on-year in 2014 from 19.8 percent in 2013, which will bring the country's annual GDP growth down to 6.6 percent, Shenyin & Wanguo Securities Co said in a research note published on May 15, noting that the country will boost infrastructure investment to bolster economic growth.

Feng also noted that authorities would continue to curb speculative demand.

"As far as I know no city has publicly announced that it has lifted home purchase restrictions," he said. "The restrictions only curb speculative demand while have no influence on rigid demand for first-time homebuyers.

Currently more than 40 Chinese cities have implemented restrictions on home purchase. Yang expects no city will announce lifting of the restrictions within this year.

However, some second- and third-tier cities such as Wuxi, Nanning and Haikou have loosened the property market control through regional development plans and household registration reform.

"More local governments will adopt a low-profile way to revive the real estate sector in the name of attracting talent or regional development," Yang said.

The targeted reserve requirement ratio cut for banks announced at a State Council meeting on Friday will also provide room for banks to fine-tune their mortgage credit policies to support the rigid demand from homebuyers, Zhang Hongwei, research director at Shanghai-based property consultancy ToSpur, said in a note sent to the Global Times on Tuesday.