Housing prices in major cities gained 10.9 percent year-on-year in February, with second-tier cities such as Urumqi, Ningbo and Haikou leading the climb, official figures showed.

Despite talk of a slowdown in the property sector, home prices have continued to rise in the past month, up 0.2 percent on January, according to the National Development and Reform Commission, which tracks housing prices in 70 large and medium-sized cities.

New apartment prices last month rose 11.8 percent year-on-year, but the growth rate dropped 0.4 of a percentage point from a month earlier.

Second-tier cities such as Urumqi in Xinjiang, Ningbo in Zhejiang and Haikou in Hainan led the price rise, up 24.2 percent, 18.3 percent and 18.9 percent.

"Prices in second-tier cities have grown much faster over the past year," Duan Hairui, an analyst with CITIC Securities, said. "Although the government is increasing low-cost housing in these regions, the trend may continue in 2008."

The government earmarked 6.8 billion yuan in its 2008 budget to build low-rent housing for the urban poor in the western and central parts of the country, Premier Wen Jiabao said in his work report. That's 1.7 billion yuan, or 33 percent, more than last year.

Meanwhile, the government also vowed to increase land supply for low-cost housing to curb rising prices.

Vice-Minister of Housing and Urban-Rural Construction Qi Ji said earlier the central government will allocate 70 percent of land supply this year to homes for middle- and low-income families and the needy.

But the schemes' beneficiaries still make up a small proportion of homebuyers, Li Shaoming, an analyst with China Jianyin Investment Securities, said. "Demand will still remain robust, especially in first-tier cities like Beijing and Shanghai."

Housing prices climbed 16.5 percent in Beijing and 9.8 percent in Shanghai in February year-on-year, despite speculation prices might start to fall this year after the government tightened loans to developers. Industry insiders said capital-hungry developers could start lowering prices as loans become more difficult to get.

Over the past month, developers such as Vanke Co Ltd, the largest by assets on the mainland, have begun offering discounts to homebuyers to boost sales.

Vanke cut prices by over 5 percent for 10 of its Shanghai properties, the biggest discount it's given in the city. Reduced prices helped the company register sales growth of 27 percent year-on-year.

Pre-owned home prices rose 11.5 percent last month, 0.4 of a percentage point lower than in January. Urumqi topped the list, with a growth rate of 24.5 percent.

(China Daily 03/19/2008 page14)