China home price rise indicates small rebound in demand

Buyers looking at a model of a new home development in China
Image caption Home buyers have been looking to take advantage of the cuts in borrowing costs

Chinese property prices increased in 35 of the country's 70 main cities during October, indicating a small rebound in demand.

Analysts said two interest rate cuts, relaxing lending restrictions and easier access to local government housing funds were behind the gain.

The real estate industry is one of the country's main economic engines.

However, China wants to avoid sudden price rises, which could shut many ordinary buyers out of the market.

These concerns were eased by the statistical office's latest figures, which show that property prices were lower in 56 cities in October, compared to the same month last year.

Steadier growth?

China is having to continually fine-tune its property regulations and policies to allow development while ensuring afford ability and steadier, longer-term price increases.

Last year, China decided to cool the property market, by making it harder for many banks to lend and more difficult for consumers to get home loans.

However, these policies may have proved too successful, and the worry now is that should the market and industry stagnate, then China's current economic slowdown will either deepen, or take much longer to end.

With this in mind, and in an effort to stoke up lending, the People's Bank of China has cut the amount of money that banks need to keep in reserve three times in the past few months.

The central bank has also cut its interest rates twice since June, to ease the burden on consumers.

Following on from this, local governments, which enjoy a certain amount of autonomy, have now started to take their own measures.

"Some local authorities have 'fine-tuned' their property policies by allowing home buyers to borrow more from public housing funds, causing a rebound in home prices," Zhang Dawei, an analyst at Beijing-based Zhongyuan Real Estate, was quoted as saying by the state news agency Xinhua.

Mr Zhang added that the moves by China's central bank to ease its policies had also contributed to the pick-up in prices.

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