Analysts still concerned as real estate prices fail to fall in China despite govt cooling measures

 
The statistics highlight the challenge Beijing faces in trying to cool the real estate market following the tightening measures it announced earlier this year.
 
Analysts said they don’t expect any significant declines in coming months. Despite this, the government is unlikely to make any major changes to its policies on the property market for now, though it may tweak some of the tightening measures, they said.
 
Property prices in 70 of China’s large and medium sized cities were unchanged in August from the previous month, the figures from the National Bureau of Statistics show. Prices were also unchanged in July, and fell just 0.1% in June from the previous month.
 
The property price index in August rose 9.3% from a year earlier, down from July’s 10.3% rise. It was the fourth straight month of slower growth since April's record 12.8% increase, the bureau said.
 
On a month on month basis, prices were flat in Beijing and fell 0.1% in Shanghai, 0.3% in Guangzhou and 0.2% in Shenzhen, the figures reveal. Investment in real estate development, one of the main forms of private investment in China, rose 36.7% in the January-August period from a year earlier to 2.84 trillion yuan, slowing from the 37.2% rise in the January-July period.
 
Analysts said Beijing needs to strengthen the measures it has taken since April to curb the speculation that has driven up property prices and could increase social discontent and economic risks.
 
The government may announce more stringent tightening measures to keep prices stagnant in the coming months, according to said Johnson Hu, an analyst at UOB KayHian, adding that these measures could include further credit curbs for developers and more stringent mortgage requirements for third home buyers.
 
The official figures are lower than some private sector estimates. Citigroup said in a research note last week that property prices in China rose 6%, while transaction volume rose 28% month on month.
 
‘The government data itself don't support policy change, but from what we’re seeing, sales volume has gone up a lot, and the average prices of the sold property have grown,’ said Citigroup analyst Ken Peng.
 
‘The sicknesses of the property market are excess liquidity, low real interest rates and the lack of investment alternatives. These structural problems are causing constant worry of a bubble and unless they are resolved, everything else is just a band-aid,’ Peng added.
 
There is also concern about rising prices in Hong Kong with the latest index showing that prices have risen to their highest since December 1997, defying government efforts to rein in real estate speculation and prevent an asset bubble.
 
The latest index from Centaline Property Agency increased 1.11% to 84.54 in the week ended on September 05, from 83.61 a week earlier.
 
The report from Centaline, one of Hong Kong’s biggest property agencies, also shows that transactions of used apartments at 10 of Hong Kong’s biggest private developments fell for a second straight week.
 
The index has risen 1.2% in the three weeks since the measures were introduced in the middle of August after having risen about 13% since the beginning of the year.
 
The government has increased down payment ratios and accelerated the sale of land for development to rein in home prices that have now surged 45% since the beginning of 2009. Prices are now on par with 1997, the height of a previous bubble that was followed by a six year slump that sent values more than 50% lower.