China home prices up in December, investment growth slows

BEIJING Fri Jan 18, 2013 11:42am EST

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BEIJING (Reuters) - China's home prices extended their slow rise in December, the fifth month in the last six to show an increase despite the government efforts to temper prices.

Average home prices in 70 major cities across China rose 0.4 percent in December from the previous month, after a 0.3 percent rise in November, according to Reuters' calculations based on data released by the National Bureau of Statistics on Friday.

Real estate investment, which accounted for 13.8 percent of China's gross domestic product in 2012, rose 16.2 percent last year from a year earlier, slowing from an annual increase of 16.7 percent in January-November.

A modest rise in home prices is thought by analysts to be acceptable to policymakers as it helps underpin a recovery in the world's second biggest economy, which grew at 7.8 percent in 2012 - the slowest pace since 1999.

China's government has spent more than two years implementing policies to rein in speculative real estate activity that has seen prices pushed far beyond the reach of many middle class citizens, fuelingsocial discontent.

It remains sensitive to the risk of a sudden upward spike and government leaders have stressed their intention to keep curbs in place, leading analysts to fret about the risk of fresh tightening policies if home prices start to soar.

"I expect there will be a mild increase in home prices in 2013 as the maintenance of home purchase restrictions would limit the room for sharp rise of home prices," said Shen Jianguang, China economist at Mizuho Securities in Hong Kong.

"Home prices still risk a sharp rebound if the current curbing policies continue to reduce house supply. If home prices jump again, I think the government will step in and take measures," said Shen.

REBOUND RISKS

Rocketing property prices were a major consequence of China's last economic stimulus effort, the 4 trillion yuan ($635 billion) package launched in 2008 at the depths of the global financial crisis.

A Reuters poll showed in December that economists expected China's national home prices to rise an annual 7 percent in 2013 and 5 percent in 2014.

China's home prices started to rebound in mid-2012 as the People's Bank of China began to expand monetary easing as part of Beijing's growth-supporting policies.

Home prices rose month-on-month in 54 of 70 major cities monitored by the NBS in December, up from 53 in November, confirming expectations that the property market is rebounding, the NBS data showed.

The NBS also said new home prices in Beijing rose 1.6 percent in December from a year earlier, compared with November's year-on-year increase of 0.7 percent. Shanghai's prices were flat in December on a year ago, versus a 0.8 percent annual fall in November.

Property sales rose 10 percent in 2012 compared with a year earlier, translating into a year-on-year increase of 8.5 percent in December alone.

Compared with a year ago, however, home prices are still falling nationwide. The 0.04 percent drop in December was the tenth such decline but easing from a year-on-year fall of 0.7 percent in November,according to Reuters calculations.

Reuters started its weighted China home price index in January 2011 when the NBS stopped providing nationwide data. The NBS now only publishes price changes for each of the 70 major cities.

(Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Nick Edwards and Kim Coghill)

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MikeBarnett wrote:
One element in China’s home prices is a five year plan to build 46 million low-cost housing units by 2015 that could house 138 million Chinese or 10% of the population. 2013 is the third year of the plan, and its main effects should be felt by June or July, the middle point of the program. In addition, the plan offers jobs with paychecks to workers who become customers and tax payers, so the economy and the government’s tax revenues increase while costs for consumers remain stable or are reduced.

This helps China avoid the ruinous US policies that led to the US housing crash of 2008 to the present. The US let too many unqualified home buyers take out too many unsafe mortgages that caused artificial home price rises insured by too many unsound mortgage backed securities that could not pay the massive insurance claims when the criminal US property schemes began unravelling. By keeping excess speculators out of the market, China avoids artificial price increases that make no real, physical improvements that are the only legal reasons for price increases.

Jan 18, 2013 3:52pm EST  --  Report as abuse
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