Home price rebounds create paradox for policies

SANYA -- Strong rebounds in China's home prices have again put the country's policymakers in a difficult position as how to uphold the economy's growth while keeping the property market in check, delegates said at an ongoing forum.

Less than six months after the government's move to increase the stakes in control over the property market in March, residential home prices seemed to risk spiraling out of control again.

"Market expectations of further home price hikes are growing in many cities, indicating that the central government shouldn't relax its controls," Zhu Zhongyi, vice president of the China Real Estate Industry Association, told 2013 Bo'ao Real Estate Forum held in South China's resort city of Sanya.

Recent months have seen a drastic surge in home purchase demand, especially in first-tier cities. On July 20, a real estate project in Beijing sold all of its 1,462 apartments in one day, with sales revenues hitting 3.79 billion yuan ($614 million). It was the single-day sales record for a real estate project since 2012.

Data from the China Index Academy showed that the average price of a new home in the country's 100 major cities rose for the 14th month in July to reach 10,347 yuan per square meters. In the period, ten big cities including Beijing and Shanghai saw their average home price go up 1.34 percent from the previous month to 17,609 yuan per square meters.

"The central government will face greater difficulties in capping real estate prices if it doesn't move to strengthen the responsibilities of local governments in coordinating housing supplies and stabilizing land prices," Zhu warned.

High hopes have been pinned on new tightening measures unveiled in March, which were dubbed as "the strictest ever control policy" by the market, to rein in the country's red-hot home prices.

According to the measures, local authorities were asked to significantly increase the income tax on the profit homeowners make from house sales, and raise the down payment and mortgage loan rates for buyers purchasing a second property.

The measures have underlined the government's tightening efforts. Since 2010, it has introduced a raft of control measures, including third-home purchase bans, property tax trials and construction of low-income houses.

However, as revenue from land sales is an important contributor to fiscal incomes, local authorities have been acting reluctantly to implement central government policies, which have offset the effects of the measures.

The central government has repeatedly stated its stance in property market control over the past years. But a recent statement released after a meeting of the country's central authorities, which mapped out the economic work in the second half of this year, did not mention regulation over the sector, leading to suspicions that China may intend to loosen control to prop up growth.

The message was further amplified by media reports that Wenzhou, a city known as the cradle of China's private businesses, has eased its grip over a purchase ban because of sharp declines in the city's home prices since the ban was introduced. But it is yet to know whether the move will be supported by the central government.

Lian Ping, chief economist at the Bank of Communications, said in an interview with Xinhua that it is too early to say whether the gesture means loosening. But given the current economic condition, the government will neither tighten the policies, nor will it withdraw existing control measures.

The growth of the world's second-largest economy has been stuck in a protracted slowdown, easing to 7.6 percent in January-June of 2013, the weakest first-half performance in three years.