Home prices dip signals stable property market

GUANGZHOU - New research has showed China's home prices dropped slightly in April from the previous month as well as from a year ago, indicating the country's property market is cooling at a stable pace.

The China Index Academy (CIA) released its April home prices report on Wednesday, showing the average home price in 100 cities dropped 0.34 percent from March to 8,711 yuan ($1,383) per square meter. The price is also down 0.71 percent from April of last year.

It is the first time home prices dropped on both a monthly and yearly basis since China initiated its new round of housing market control measures in April 2010, according to the CIA report.

"It sends a clearer signal for the future trend of the Chinese property market," said Hu Gang, an economic professor with Guangzhou's Jinan University.

Meanwhile, home prices in 10 major Chinese cities dropped 2.6 percent year-on-year to 15,391 yuan per square meter, the report showed. The 10 cities are Beijing, Shanghai, Shenzhen, Guangzhou, Suzhou, Hangzhou, Chengdu, Tianjin, Nanjing and Chongqing.

"In contrast to the broader 100 cities, the figures from the 10 major cities are more persuasive as these first-tier cities better reflect the trend of the property market," Hu said.

Industry watchers say there are more bubbles in the property market in these first-tier cities, and their home prices are more likely to be influenced by the government controls.

To calm property prices two years ago, China adopted measures including tighter lending policies, higher down payments, a ban on third-home purchases, property tax trials and supply of more low-income housing.

Premier Wen Jiabao has also urged local governments not to relax curbs on home prices, saying property control is one of the most important tasks for this year.

While some purchasers are sanguine about falling home prices, worries still linger over negative affects brought by the cooling property market to the whole economy.

The shrinking investment in the property market is believed to be responsible for the slowing economy in the first quarter of 2012.

Not only property developers are plagued by the sluggish market, but also local governments have to withstand the losses as a result of less tax and land leasing revenues, industry watchers point out.

"It is doubtful whether local governments will thoroughly carry out the central government's policy on calming the property market as this is against their own interests," according to Hu.

Local governments might roll out subtle policies to ease control over the property market, he added.

With this backdrop, the Chinese government should further stress its strict control over the property sector.

"The central government will stick to its policy of curbing property speculation in a bid to bring runaway home prices under control," said Qin Hong, director of the Policy Research Center under the Ministry of Housing and Urban-Rural Development.