TODAY ONLINE : Housing bubble slowly shrinking?

Housing bubble slowly shrinking?

Beijing's efforts to deter property speculators look to be paying off

11:55 AM Aug 10, 2010



BEIJING - China's property prices rose at the slowest pace in six months in July as the government clamped down on speculation to prevent asset bubbles and keep housing affordable.

Prices in 70 major cities climbed 10.3 per cent from a year earlier, the Statistic Bureau's newspaper, China Information News, reported this morning. That was less than an 11.4-per-cent increase in June and the median estimate of 10.5 per cent in a Bloomberg survey of eight economists.

China's banking regulator said on Friday that the government will maintain policies to cool the property market, damping speculation that slowing economic growth would encourage an easing of the measures. The regulator has told lenders to conduct stress tests to gauge the impact of home prices falling as much as 60 per cent in the hardest-hit markets, a source said last week.

"The government's resolve on property curbs will be tested as increasing risks to external demand and slowing domestic production and investment cool growth later this year," said Mizuho Securities Asia economist Shen Jianguang. "The government may continue to rein in property speculation, but some of the most stringent measures may be adjusted at the end of this year when price corrections start to spur transactions."

Restrictions imposed by the government this year have included higher down-payment and mortgage rates for multiple- home buyers and instructions for lenders to halt third-home loans in areas with "excessive price gains".

Price increases have slowed from a record 12.8 per cent gain in April. Prices were unchanged in July from June, following a 0.1 per cent month-on-month decline in June that was the first decrease in 16 months.

Investment in real-estate development rose 37.2 per cent in the first seven months of 2010 from a year earlier to 2.39 trillion yuan ($476 billion) after a 38.1-per-cent gain in the first six months, the newspaper said. BLOOMBERG



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