China Home Prices Jump 10.99 Percent in November as Curbs Fail

An independent survey published this weekend shows China home prices continuing to crescendo in November, despite new government moves to restrict housing sales.

The survey by China Index Academy documented that the average price of a new home across 100 cities surveyed rose 10.99 percent in November, compared to the same period in 2012. The average cost per square metre for a home in a Chinese city is now RMB 10,758 ($1,766).

Latest Market Curbs Failing

This latest price surge may raise issues for China’s government as it seeks to reassure a nervous public that they will be able to afford a home. Especially given that a curtain of new restrictions it introduced last month has proven to be little barrier to the rise in prices.

During November, China’s first tier cities rapidly announced new restrictions intended to stifle home demand, primarily in the form of higher down payment requirements for second-home buyers.

However, even with these measures having started their roll out during the first week of the month, November’s 10.99 percent increase in the Academy’s index was higher than the rises of 10.69 percent in October, 9.48 percent in September and 8.61 percent in August.  The Index Academy is the research arm of real estate website Soufun.

More Restrictions on the Way

While November’s new policies on home sales were initially limited to the country’s first tier cities, by the end of the month, the push from the central government to rein in prices had penetrated into a number of second-tier communities.

Experts now expect the higher downpayment requirements to become standard in China’s large cities, and additional measures may be on the way.

Speaking to the local press, Hu Zhigang, deputy head of China Real Estate and Housing Research Association indicated that city governments are also likely to face renewed pressure from the central authorities to strictly enforce existing measures, raise transaction costs for second home purchasing and increase supply of government-subsidized housing.

The moves to restrict the market show a gradual shift from the Xi government’s earlier preference for spurring growth over controlling housing costs.

However, none of the measures that have been introduced so far have great potential for changing the market direction, as increases in downpayments and stricter enforcement of rules have proven to be little impediment to demand in recent history.