Home prices in Chinese cities to continue rising

J.P. Morgan said it was "constructive" on the Chinese property sector for 2014. "The positive factors that have driven property prices over the past few years, including economic growth and income growth, have remained and are likely to remain strong."

J.P. Morgan said it expected no new nationwide policy to come out in 2014 and both administrative and monetary policies should remain stable next year, despite discussion of a real estate tax.

A reform plan, unveiled on November 15 by the Communist Party of China Central Committee, said the country would speed up legislation of a real estate tax, and build a nationwide home ownership database.

While many are worried about the potential impact from the real estate tax, J.P. Morgan expected the impact would be limited, and would not result in a substantial slowdown in the market.

China started implementing the real estate tax, on a trial base, in Shanghai and Chongqing in January 2011.

J.P. Morgan maintained that the real estate tax might be implemented in selected cities with bad home affordability, but would not be expanded nationwide, and rates should remain low.

It listed cities with bad affordability as Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Xiamen and Haikou, which would probably face higher policy risks. For these cities, the real estate tax and the loan-to-value caps are the tools which local governments are likely to use, J.P. Morgan added.

CCB International Securities, owned by China Construction Bank, said in its latest report that the Chinese property market is likely to have "a roaring start" in the first quarter of 2014.

After that, the market is expected to soften under a succession of price curbs, credit tightening and slowing sales growth, it said, adding that the sector's future might rest in China's aggressive move to urbanize.

Property curbs tend to be relatively more relaxed once GDP growth slows, and tighter after economic growth recovers, CCB International Securities said, predicting a period of relatively lax property controls in the second half of 2014.

The property industry has become a significant supporting force for China's economic growth.

Analysts expected China's future property policies would have to strike a tough balance between the decelerated growth of the economy and the rise in home prices.