China's home prices unlikely to see strong rebound

BEIJING -- China's home prices are not expected to rebound during the upcoming sales season, despite a recent moderate pick-up, analysts have said.

The country's real estate market heated up in the late summer due to demand from first-time buyers. Data from the China Index Academy showed Monday that average new home prices in 100 major Chinese cities rose 0.24 percent from July to August, marking the third consecutive month of rising prices.

With the government working to boost supplies and market demand becoming more modest after a buying spree that has lasted since March, property prices will remain stable in September and October, the traditional peak season for home sales in China, said Gu Yunchang, deputy head of the China Real Estate and Housing Research Association.

The Chinese government has been building more houses for low-income families as part of its efforts to cool the market down, aiming to complete 36 million such units between 2011 and 2015.

Construction on over 21 million affordable homes started between 2009 and 2011, with nearly half of the projects having already been completed, Premier Wen Jiabao said during an inspection tour last week in Beijing's neighboring city of Tianjin.

"Increasing the housing supply will be key in curbing real estate prices," Gu said, adding that market demand will grow weaker, as price-sensitive first-time buyers will postpone purchase if prices soar beyond reach.

Home transactions dropped after prices climbed during the March-July sales boom, which was fueled by the central bank's moves to boost lending and buoy the slowing economy.

In contrast to a moderate price rebound in August, Beijing saw transactions of commercial homes down 12.4 percent from July to August, with sales of used homes down 20.1 percent, municipal government data showed.

The figures indicate that the property market has cooled somewhat within a rather short time, said Chang Qing, an analyst at Homelink, a Beijing-based real estate agency.

Chang also cited CIA data as saying that fewer cities recorded price gains in August, adding that the growth rate for average home prices in cities surveyed from July to August was smaller than that of the previous month, both of which can be seen as signs of cooling.

However, Zhang Dawei, chief market analyst at Beijing-based Zhongyuan Real Estate, said both real home transactions and prices are likely to go up further during the next two months.

"Increases in transactions and prices will depend on whether there will be new tightening measures and how strong they are," Zhang asserted.

The market may still continue its rally in the short-term, since property developers have been destocking. In Beijing, housing supplies have dropped to a record low of 77,000 units as a result of increased sales and a decrease in the amount of land reserved by developers for new projects, Zhang noted.

Cash-strapped real estate developers have cut land purchases in light of government control measures, such as bans on third-home purchases, introduced since 2010 to contain home prices.

Data from the Ministry of Land Resources showed that only 47,200 hectares of land were sold to property developers in the first half, accounting for 29.6 percent of the full-year land supply target set by the government.