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'Home prices to continue to increase'

By Zheng Yangpeng | China Daily | Updated: 2013-07-25 06:36

Housing prices will rise more slowly in the second half than in the first, but upward pressure will persist, prompting experts to call for "long-term" policies that can be adapted to market forces.

"Local governments face great embarrassment because their property curbs have become increasingly irrelevant to the market," said Yang Hongxu, vice-president of the Research Institute of E-house China, at a recent symposium in Shanghai.

In March, the central government announced a 20 percent capital gains tax on pre-owned home sales. Several cities announced detailed policies of their own at the end of March.

But sales only slumped briefly. Market activity was brisk in the second quarter. Prices have kept rising.

According to the China Index Academy, a Beijing-based real estate research organization, the average housing price in 100 cities was 10,258 yuan ($1,671) per square meter in June, up 4.55 percent from January.

In Beijing, which has the toughest curbs, prices rose 10.8 percent in the same period to 27,783 yuan per sq m.

According to the National Bureau of Statistics, housing prices in 63 of the 70 cities that it monitors rose month-on-month in June, compared with 65 in May.

Most experts interviewed by China Daily said prices will keep rising for the remainder of the year, although momentum will slow.

They noted that housing investment, a leading indicator of the property market, is picking up. Developers' financial health greatly improved during the second-quarter sales boom, meaning housing investment was being scaled up, particularly in first-tier cities.

Already, land markets in first-tier cities are heating up, with surprising premium bids at auctions in Beijing, Shanghai and Guangzhou. The higher land prices will initially at least translate into higher housing prices.

Second, housing transaction volume is high because of robust demand and supply.

On the supply side, developers usually offer more units in the second half. On the demand side, the number of first-time home buyers is still high. Demand is being boosted by an increasing number of buyers seeking to trade up.

"Prices will be buoyed by buyers' expectations that prices will rise indefinitely, given the fact that prices remained stubbornly high under the last round of curbs," said Lian Ping, chief economist of Bank of Communications.

However, analysts also said that whether on a month-on-month or year-on-year basis, price gains will be smaller in the second half of this year than in the first half.

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