Business

China property prices rise in June after decline

  • 18 July 2012
  • From the section Business

Property prices in 70 Chinese cities rose slightly in June, compared to May, after eight months of decline.

Home prices rose 0.3% in Beijing and 0.2% in Shanghai compared to the previous month, official data showed.

China had implemented two years of curbs on the real estate market to bring prices down.

However, as the economy slowed to a three-year low in the second quarter, measures have been taken to boost growth.

Spurring growth

The Chinese central bank has cut key interest rates twice in recent months. Analysts said this and other steps have broken the trend of falling home prices.

"With rate cuts and a return of market confidence, we think transactions will continue to recover," said Lan Shen, from Standard Chartered in Shanghai.

Official data showed that new home prices fell in only 21 cities in June, down from 40 in May.

Across the country, home prices were down 1.5% in June compared to the previous year, according to Reuters calculation based on the data.

China no longer publishes national property prices, instead providing a survey of select cities.

Future rise?

Massive spending on infrastructure and construction projects in China after the global financial crisis had pushed up property prices.

Analysts have said that speculation in the market could have triggered a property price bubble, which promoted authorities to take preventive measures to rein in prices.

Premier Wen Jiabao has said that prices must come down in major cities.

Yet, some analysts said the shift by policymakers towards pro-growth policies since May this year means property prices could be set to rise once more.

Image caption Speculation in the property market has lead to fears of an asset bubble in cities in China

"If economic data stays weak, [authorities] will close one eye and let housing prices increase," Jinsong Du, a Hong Kong-based analyst with Credit Suisse told the BBC.

"Because that is the only way to stimulate the economy in the near term."

He added that prices could rise up to 10%.

"But after that, if the economy stabilises the Chinese government may crack down on the housing market again."

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