BEIJING (Reuters) - China’s new home prices rose at the fastest rate in at least 2-1/2 years in August, with some large cities rising around double the national pace, complicating government efforts to keep prices in check while supporting one of the stronger areas of the economy.
The government has tried to control property prices, wary of a potential bubble and the possibility of unrest if people are priced out of the market, but cannot push too hard as a strong property market has helped offset a general economic slowdown.
“We think the government is likely keep property policy stable as the mild recovery of the broader economy is not so stable yet,” said Jinsong Du, property analyst at Credit Suisse in Hong Kong.
Average new home prices in China’s 70 major cities rose 8.3 percent from a year earlier, according to Reuters calculations based on data published by the National Bureau of Statistics.
That accelerated from July’s 7.5 percent gain to be the biggest increase since Reuters began calculating the nationwide figure in January 2011.
From a month earlier, prices rose 0.8 percent in August, picking up slightly from July’s gain of 0.7 percent to end a four-month run of moderating rises. Sixty-six cities posted month-on-month price gains, up from 62 in July, the NBS said.
Some of the country’s largest cities continued to show rises well above the national average, with prices up around 15 percent in annual terms in Beijing and Shanghai, and more than 18 percent in the southern cities of Guangzhou and Shenzhen.
The rises in those four cities were the largest since January 2011, when the NBS changed the way it calculated home price changes.
The central government’s difficulty in checking house prices is partly due to strong demand for property, which is seen as a safe haven investment, and to efforts by local governments to sell land for much-needed revenues.
Two plots of land in Beijing and Shanghai sold for record prices in quick succession earlier this month, and analysts say the divergence between big cities with strong demand and small cities suffering a glut has forced the central government to adopt different targeted measures to rein in home prices.
“Some local governments are likely take fresh measures to stem the rebound of home prices as many of them cannot meet their targets set earlier this year,” said Lin Bo, vice-head of research at China Real Estate Information Corp, a property data provider in Shanghai.
The housing ministry recently called in officials from seven cities to talk about next steps in property tightening. Zhengzhou in central Henan province has subsequently announced new restrictions on home buying.
However local measures are unlikely to translate into a broader crackdown, given property affects some 40 other industries from cement to steel to furniture, and has helped buoy an economy that is beginning to find its feet after a long slowdown.
“We do not expect further dramatic control of the sector will be implemented in the near term,” said Kaven Tsang, senior analyst at Moody’s in Hong Kong.
“But the central government will ask the local governments to effectively enforce the measures in place in case property prices continue their strong growth.”
Reuters started its weighted China home price index in January 2011 when the NBS stopped providing nationwide data.
Editing by John Mair