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Shanghai still top major city for housing price inflation

By Richard Fu | December 18, 2013, Wednesday | Online Edition

SHANGHAI again led China’s housing price inflation in November among major cities, according to data released by the National Bureau of Statistics today, despite government measures to curb the real estate market.

Prices for new residential properties, excluding government-funded affordable housing, rose year-on-year in 69 of the 70 cities tracked by the bureau, unchanged from October and September.

In Shanghai, prices surged 21.9 percent from a year earlier in November, after gaining 21.4 percent in October. There was an increase of 21.1 percent in Beijing, 21.0 percent in Shenzhen and 20.9 percent in Guangzhou, all so-called tier 1 cities.

Wenzhou in eastern Zhejiang Province continued to be the only city that registered a decline.

Still, Liu Jianwei, a senior statistician of the bureau, said that the month-on-month increases in home prices has slowed. On average, new home prices in the 70 cities rose 0.6 percent in November from October, compared with 0.7 percent in October.

“This is mainly because those cities with surging home prices have intensified their tightening efforts by raising the transaction cost of second homes and increasing the supply of affordable homes,” Liu said.
A number of Chinese cities, including Shanghai, have announced a slew of measures in the past months to rein in soaring home prices.

JPMorgan economist Zhu Haubin said regional divergence has been remarkable in this round of house price inflation, which is different from the housing boom in 2009-2010.
“Tier 1 cities generally face an under-supply situation due to tighter policies. By contrast, new supply increased faster in smaller cities, where the house price increase has been only moderate,” Zhu wrote in a note today.

Housing price inflation has largely been driven by a bounce back of residential demand, driven by urbanization and strong growth in disposable income, Zhu said. The demand has been artificially compressed by property tightening policies in recent years, but the impact of those has been diminishing. The general easing in credit conditions since the second half of 2012 and lack of additional property tightening also supported the housing price dynamics.

Zhu said JPMorgan expects housing prices to increase 10 percent in tier 1 cities and 5-10 percent in tier 2 cities, but remain flat in tier 3 cities in 2014.

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