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China’s Home Prices Defy Curbs, Rising in 68 of 70 Cities

China’s January new home prices rose from a year earlier in all but two of the 70 cities monitored by the government, defying property curbs to keep housing affordable.

New home prices in the capital Beijing advanced 6.8 percent in January from last year, while Shanghai climbed 1.5 percent, the statistics bureau said on its website today, initiating a new method of calculating prices. Haikou had the biggest gain, surging 21.6 percent, and 10 cities had increases exceeding 10 percent. Housing values in the southeastern city of Quanzhou and the western city of Nanchong fell.

China extended property curbs last month, including raising the minimum down payment for second-home purchases, telling local governments to set price targets on new properties, and introducing taxes for residential homes in Shanghai and Chongqing. The central bank raised interest rates on Feb. 8 for the third time in four months.

“The new data clearly shows home prices are still rising and the government curbs only suppressed transaction volumes,” said Jinny Yan, Shanghai-based economist at Standard Chartered Plc. “The ultimate problem is monetary policy — the government should at least raise interest rates two more times this year because if the liquidity is not tightened, it would be impossible for home prices to fall.”

Stocks Fall
The measure tracking property stocks on the benchmark Shanghai Composite Index lost 0.5 percent at the 11:30 a.m. break, paring a 0.6 percent gain before the data was released. The real estate index climbed 4.2 percent this year, compared with the 3.3 percent advance in the benchmark gauge.

New home sales in Beijing rose 0.8 percent in January from December and 0.9 percent in Shanghai. Chongqing is the only city among the 70 that posted a decline from the previous month, dropping 0.1 percent, the statement said.

Existing home prices in Beijing rose 2.6 percent in January from a year earlier, while those in Shanghai added 1.7 percent. Prices of previously owned apartments fell in four of the 70 cities, the government data showed.

“Property prices and sales still remained strong as many buyers dashed into the market ahead of the government curbs,” Du Jinsong, a Hong Kong-based analyst for Credit Suisse Group AG, said before today’s release.

New Calculation
China stopped releasing national average property prices and changed the methodology of the survey starting this year, the statistics bureau announced Feb. 16, to more accurately reflect price gains.

The agency will continue to monitor 70 big and medium-sized cities and use online registration data for home transactions for 35 of them, it said. For cities that don’t have online registration systems, the bureau will continue to use figures from local authorities.

Chinese Premier Wen Jiabao pledged to curb property speculation and add more affordable housing in his Feb. 1 Lunar New Year speech. The country needs to “resolutely control the property market” and keep prices stable, he said.

“Although property is being targeted with tightening measures, overall credit growth in the economy remains expansionary,” Erwin Sanft, head of China and Hong Kong research at BNP Paribas SA, said in an e-mail. “The memories of the 2008 downturn in exports and housing prices are still too fresh at central and local government level” to create another downturn.

Beijing’s Curbs
Beijing banned residents from buying more than two homes and added a requirement for non-residents to provide five years of tax documentation to buy apartments, the capital city’s government announced this week.

“The general market is feeling the impact from the curbs in terms of transaction volume and sentiment,” said James Macdonald, head of China research for Savills Property Services (Shanghai) Co. “The market sentiment has changed quite significantly with the repetitive government measures that made the headlines.”

Today’s numbers came after private data indicated strength in property sales in January. SouFun Holdings Ltd., the country’s biggest real-estate website owner, said home prices in 100 cities it monitors advanced 1 percent in January from December, the biggest gain for at least six months. The government’s figures today also showed all but two cities posted month-on-month gains in new home prices.

“The January data don’t really reflect whether the government’s policies are working, because most of these curbs took place later last month or in February,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd.

Vanke, Evergrande
China Vanke Ltd., the country’s biggest developer, said revenue more than tripled to a record 20.1 billion yuan ($3 billion) in January. Sales for Guangzhou-based Evergrande Real Estate Group Ltd. jumped 181.6 percent from a year earlier to 9.8 billion yuan, the company said on Feb. 15.

China’s home prices under the old calculation rose for a 19th month, jumping 6.4 percent in December from a year earlier.

China International Capital Corp. cut its 2011 forecast for the nation’s property transaction volume after the government’s latest curbs. Transaction volumes are expected to drop 10 percent from a year earlier to 940 million square meters (10.1 billion square feet) in 2011, compared with an earlier estimate for a 5 percent increase, analyst Bai Hongwei wrote in a report on Feb. 1.

New lending to developers and mortgage loans may both fall about 30 percent in 2011, according to the report.

“Demand will be restrained in the beginning of the year after the government measures,” said Ying Wang, a Beijing-based property analyst for Fitch Ratings Ltd., who has a “neutral” view on the sector. China’s home prices will rise about 5 percent to 10 percent this year because property remains hedge against inflation, Wang said.