Housing prices in China’s 70 largest cities rose 9.5% year-on-year in January, 1.3% higher than December, according to the National Development and Reform Commission. Prices of new home were up 11.3% from the same time last year and up 1.7% from the previous month, while secondary market prices increased by 8% year-on-year and just under 1% month-on-month.
The data gives credence to fears that the property market is following the trajectory of the last price cycle, when aggressive acceleration peaked in late 2007 after the government intervened to prevent the market from imploding. Though based on historical experience, these fears are overplayed. Since the middle of 2009 Beijing has been issuing warnings about rising house prices. Commercial banks have been reprimanded over lending to developers and a number of subtle cooling measures have been introduced, including a tightening of third home mortgages and the reinstatement of a business tax exemption period on used-home sales from two years back to five.
The government – which is sensitive to the key role that real estate plays in China’s economic growth story – is likely to persevere with this measured approach, eschewing any austerity measures that threaten to kick the legs out from the market.