New Home Prices Up in Fewer Chinese Cities

By ESTHER FUNG

SHANGHAI?Prices of newly built homes in 50 of the 70 large and medium-sized Chinese cities covered in a government survey rose in May from the previous month, down from 56 cities in April, indicating the central government's tightening efforts are gradually beginning to show marginal success in certain parts of the country.

Residential property price growth has moderated in some major cities after the government took a series of steps to deflate a property bubble and curb real-estate speculation, though some investors have turned to buying homes further inland where the measures are less harsh, boosting demand and prices in these second- and third-tier cities.

Prices of newly built homes in 67 of the 70 cities covered by the survey rose in May from a year earlier, unchanged from the 67 recorded in April and March, and lower than the 68 recorded in both January and February, the National Bureau of Statistics said in a statement Saturday.

Among major cities, Beijing's newly built home prices rose 0.1% in May from April, when prices rose 0.1% from the previous month. Meanwhile, newly built home prices in Shanghai rose 0.2% in May from a month earlier, slower than April's 0.3% month-on-month increase, the bureau said.

"Prices are still up in 50 cities, indicating that the government won't loosen its tightening stance," said Jinsong Du, a Credit Suisse analyst, adding that monetary tightening measures such as increases in interest rates and banks' reserve requirement ratios, which aren't directly aimed at the real estate market, will be more effective in bringing down prices.

Mr. Du added he foresees a more subdued private property market for the next two to three years and said he expects prices to decline 5%-10% this year from a year earlier.

Since January 2010, policy planners have introduced administrative and monetary tightening measures to curb speculation, including raising down-payment requirements on mortgages for second homes to 60% from 40% and raising the amount of cash banks must hold in reserve 12 times, essentially reducing the amount of money that banks can lend.

May is the fifth month for which China has released house price data for individual cities, after scrapping a monthly index of average property prices in 70 large and medium-sized cities.

"A Hong Kong-listed property developer told me yesterday that while credit conditions are tighter than what he had experienced during the downturn in 2008, sales have yet to decline to levels seen at that time," said Johnson Hu, a property analyst from CIMB-GK Securities. "Larger, listed developers are likely to pull through this period of reduced credit, but the small and mid-sized ones could face major financing difficulties."

Ratings agency Standard and Poor's on Tuesday downgraded its outlook for China's property development sector to negative from stable due to a tightening of credit conditions in the country and slower sales. In April, Moody's Investors Service lowered its rating on China's property sector to negative from stable on concerns that rising interest rates and reduced bank lending would dampen demand.

Fitch Ratings said Wednesday it is maintaining a stable outlook for the Chinese real-estate sector based on the general macroeconomic outlook, but couldn't rule out the possibility of standalone ratings revision of individual property developers.

Source: http://feeds.wsjonline.com/~r/wsj/xml/rss/3_7013/~3/9KofxILfSEA/SB10001424052702303823104576393021624980928.html

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