BEIJING: Chinese property prices last month recorded their first monthly fall since February last year, providing further evidence that a government drive to let the air out of an inflated market is working.
Average prices in 70 cities edged down 0.1 per cent from May, lowering the annual property inflation rate to 11.4 per cent last month, from 12.4 per cent in the year to May and April's reading of 12.8 per cent, the National Bureau of Statistics said yesterday.
Coming on the heels of much slower import growth and a controlled moderation in bank lending, the figures reinforced the conviction of many economists that no further policy tightening is on the cards.
However, with surprisingly resilient exports offsetting softer domestic investment, the consensus is that Beijing will not be rushed into relaxing policy until clearer signals emerge from the all-important property and construction sectors.
The government, determined to squeeze out speculators, refuses to back down by reversing curbs imposed in April; developers do not want to waver because they paid high prices for land last year and have a bullish long-term outlook; and home buyers are sitting on the sidelines, said Mr Dong Tao, chief China economist at Credit Suisse in Hong Kong
Engineering a soft landing in the housing market is critical. To prick a bubble that had developed in big cities such as Beijing and Shanghai, the government in April raised down-payments, ended mortgage discounts, tightened rules on loans to developers and made it harder to buy multiple homes.
Although annual property inflation has fallen for two months in a row, underlying demand remains strong and few home buyers expect a sharp decline in prices, said Mr Zhang Huadong, a property analyst with Xiangcai Securities in Shanghai.
'It's very unlikely that the government will relax its policy of curbing demand,' he said. 'If policy were relaxed, there would be another surge in property prices. It would be a disaster for the market.'
Source: Straits Times, 13 Jul 2010