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Prices Of New Homes In China Continue To Recover

News Posted On: 24 August 2012

Prices of new homes in China increased in July, due to interest rate cuts and added incentives for first-time buyers. According to the National Bureau of Statistics, prices rose in 49 out of the 70 cities tracked by the government compared to a month earlier, when prices rose in just 25 cities.

Just nine cities saw price falls, and prices were unchanged in another 12. This was the most number of cities to see prices increase since May last year. Interest rates have been cut twice since June, prompting buyers to return to the market even while the government struggles to make housing more affordable.

It's likely that this will prevent the Peoples Bank of China from reducing rates any further, and it may prompt the government to introduce more policies in order to prevent a property bubble. This could include extending property tax trials to more cities. Last month an inspection by the State Council found policies had been eased by certain local councils, leading to price increases that are likely to be investigated.

Experts feel China's property prices have bottomed out, and any new policies will largely depend on the trend of home prices. They think prices are unlikely to rise sharply. Figures show there is strong demand from first-time buyers, and that interest rates had a big impact on the market.

Although the government may issue some new tightening measures they are likely to be quite muted as it needs to balance any property curbs with economic growth. During the second quarter of the year the Chinese economy expanded by 7.6%, which is the slowest rate in three years. It's estimated growth for the next quarter will be 7.5%.

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