China’s Home Prices Grow Most in Six Months on Lower Supply
Covid-19 testing trucks in an area under lockdown on Robinson Road at night in the Mid-Levels neighborhood of Hong Kong, China. (Photographer: Justin Chin/Bloomberg)

China’s Home Prices Grow Most in Six Months on Lower Supply

China’s home prices grew at the fastest pace in six months in February, as a lower supply of projects during a holiday season added to a fear of missing out among buyers.

New home prices in 70 major cities, excluding state-subsidized housing, rose 0.36% last month from January, when they gained 0.28%, National Bureau of Statistics figures showed Monday. Values in the secondary market, which faces less government intervention, climbed 0.34%, almost the same pace as January.

Red-hot sentiment has persisted in the face of stricter curbs imposed in some large cities. More prospective homebuyers stayed in cities where they work last month -- a period that included the Chinese New Year holiday -- due to a renewed surge of coronavirus cases, spurring home purchases.

China’s Home Prices Grow Most in Six Months on Lower Supply

In 29 key cities monitored by China Real Estate Information Corp., new-home sales more than tripled in February from a year earlier, when the health crisis seized up the economy. New-home supply in those cities plunged 63% by area in February from January, it said.

The rush to real estate in the biggest hubs pushed China’s top policy makers to pledge to solve the housing problem at its annual legislative session earlier this month. “We will keep the prices of land and housing as well as market expectations stable,” Premier Li Keqiang said in a speech.

Policy makers have unveiled a slew of novel policies to fine tune the industry this year, including a new mechanism on banks’ real estate lending and fresh bidding rules designed to curb land costs. In January, Shanghai and Shenzhen further cracked down on housing speculation via fake divorces, and cities including Hangzhou requested additional requirements when purchasing a second residence.

Such measures are likely to have at least some effect in cooling the market, according to analysts.

“Most of the policies seem to be refinements” of existing steps rather than anything significant that might severely curtail buyer demand, said James Macdonald, the Shanghai-based head of China research for Savills Plc.

A greater divergence between cities may emerge in the coming two months, traditionally a busy season for sales, due to regional differences in policies, said Xu Xiaole, a property analyst at Beike Research Institute. Existing-home sales have already been slowing in Beijing and Shanghai this month, which will probably lead to slower price increases there, while prices are still likely to surge in tier-two cities where sentiment remains strong, Xu said.

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