Shanghai Real Estate News

SHANGHAI—China's surging housing market is showing fresh signs of moderating, with growth in the average prices of new homes slowing on a month-on-month basis in November even as costs soared higher relative to a year earlier.

Beijing has been trying to tame spiraling housing prices since 2010, but resurgent demand for homes this year has prompted some local governments to step up their efforts to cool prices in recent weeks. The central government has also pledged to ramp up the supply of affordable homes and vowed to roll out property taxes on a wider scale.

Government data on November new-home sales released Wednesday showed that fast growth in housing prices is tapering off. The results match data from private-sector surveys released earlier this month and echo a recent trend of slowing increases on a month-to-month basis.

Prices in 70 Chinese cities rose an average of 0.53% from a month earlier, compared with gains of 0.59% in October and 0.67% in September, according to an analysis of the data by The Wall Street Journal.

On a year-over-year basis, prices in the same 70 cities were up an average of 9.1% in November, the highest rate since January 2011, and compared with gains of 8.8% in October and 8.2% in September.

"There should be more sustainable growth in the housing market next year," said James Macdonald, head of research at property consultancy Savills China, noting that a surge in prices and sales this year had been due to pent-up demand for homes.

"Demand should come off a bit next year—it's hard to sustain this type of momentum," he said.

Housing sales have also eased in the first two weeks of December, according to private data-tracker China Real Estate Index System. The period is typically a slower time for purchases because banks issue fewer loans as they approach the ceilings on their annual loan quotas.

While housing prices recorded some dramatic increases this year, analysts said that a boost in housing supply next year, as well as the introduction of property taxes, could rein in demand. Senior government officials have said that China would speed up legislation on a property tax and expand trial programs beyond the existing areas of Shanghai and Chongqing.

"Whatever the prognosis for further policy curbs, the existing restrictions had already taken some of the shine off the sector," said the Urban Land Institute, a U.S.-based nonprofit research organization, in a recent report.

China's leaders have been walking a fine line regarding the real-estate market. While rapid price growth is putting housing out of reach for many Chinese and feeding social discontent, the government doesn't want to cool the market too dramatically. The property sector contributes significantly to China's economy, which has slowed from growth rates of above 8% in previous years.

On a year-over-year basis, average home prices in the large cities of Shanghai, Shenzhen and Guangzhou were up last month. In Guangzhou, prices increased 20.7% from a 20.5% gain the previous month. Shanghai prices rose 18.2% from a 17.8% increase, and in Shenzhen, average home prices grew 20.6% from a 20.2% rise in October.

Growth in home prices in Beijing moderated slightly, with prices rising 16.3% in November compared with a 16.4% gain in October. The Beijing government said in October it will ramp up the supply of affordable homes for lower-income households over the next two years.

"The government will leave its foot on the brake for a while, especially in the major cities where prices have been rising too quickly," said Zhang Yanbin, an analyst at Zheshang Securities. "I think home buyers' expectations may be starting to change."

The central government has been tightening property-sector controls for nearly four years to hold back spiraling home prices, but the results have been limited, especially in first-tier cities.

Giant cities like Beijing, Shanghai, Shenzhen and Guangzhou have all imposed some restrictions, while Wuhan, Shenyang and Nanjing have turned to fresh property-cooling measures in recent weeks. These curbs included making more stringent the criteria for households without local permanent residence permits to qualify to purchase homes, and increasing down-payment levels for buyers of second homes.

WALL STREET JOURNAL
By Esther Fung