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Chinese Housing Bubble Picks Up

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Pai Gow gamblers still at the table.


The rise in home prices in major Chinese cities accelerated in July, a survey showed Thursday, as the government suggested it might not take further steps to tighten the market. The average price of new homes in 100 major cities rose 7.94 percent year on year last month, up from an increase of 7.4 percent recorded in June, according to the independent China Index Academy (CIA (Milan: CIA.MI - news) ).

That brought the average cost of new homes to 10,347 yuan ($1,689) per square metre, said the CIA, which is owned by Soufun Holdings (NYSE: SFUN - news) , China's largest real estate website operator.

Month on month, the price increased 0.87 percent, marking the 14th straight month of growth and accelerating from June's 0.77 percent.

The academy said the pickup in prices last month was led by rising uncertainties about the economy, which eased concern about new measures aimed at tightening the property sector.

Worries over the world's second-largest economy have intensified this year after an expected rebound failed to appear.

China's gross domestic product grew 7.8 percent in 2012, its worst performance in 13 years.

It has since weakened further, with growth in the April-June period dipping to 7.5 percent, from 7.7 percent in the first quarter and 7.9 percent in October-December.

Beijing last week unveiled steps to boost growth, including reducing taxes on small companies as well as encouraging railway construction and foreign trade incentives.

It said Tuesday it would promote the stable and healthy development of the domestic property sector, official media reported, in contrast to previous remarks about regulating the market.

The academy expected policies governing the sector to stay steady in the coming months, credit control to be "reasonable" and prices to continue to rise as a result.

"In the next half of the year or over an even longer period of time, the stabilising macro environment will help release further demand for homes and sales and prices will be in upward momentum," it said.

Property prices are a sensitive issue in China and authorities have sought for more than three years to control their rise.

Measures have included restrictions on purchases of second and third homes, higher minimum down-payments and taxes in some cities on multiple and non-locally owned homes.

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