China's February Home Prices Fall Most in 19 Months on Curbs, SouFun Says

Home prices dropped 0.3 percent last month from January, according to SouFun, which began compiling the figures in July 2010 when housing values fell 1.3 percent. Residential prices slid in 72 of 100 cities tracked by the company last month, 12 more than in January, it said in an e-mailed statement today.

Shanghai restated home purchase restrictions that allow only local permanent residents to buy a second home on Feb. 28, a week after a newspaper affiliated with state-run Xinhua news agency said China’s financial center had broadened its definition. Premier Wen Jiabao has maintained that China won’t waver on its real estate controls and efforts to bring prices down to a reasonable level.

“Home prices will continue to fall in the coming months because it’s pretty clear that the central government won’t ease the tightening soon,” said Zhao Zhenyi, a Shanghai-based property analyst at Yuanta Securities Co. “Developers will launch more projects as inventories increase.”

Local governments have attempted to ease property tightening policies with little success. The eastern Chinese city of Wuhu on Feb. 13 reversed its decision to relax property curbs. The mid-sized city in Anhui province had planned to waive a deed tax and subsidize some purchases on Feb. 9, becoming the first Chinese city this year to signal its intention to ease property measures.

Developers Fall

Average home prices nationwide climbed 0.93 percent in February from the same time in 2011 to 8,767 yuan ($1,391) a square meter (10.76 square feet), the slowest pace of growth since August, SouFun said. The month-on-month decline in February was the sixth straight drop, the longest losing streak since SouFun started tracking the data.

Chinese property developers fell in Hong Kong trading and made up nine of the 10 biggest decliners on the MSCI China Index (MXCN) as of 10:42 a.m. China Overseas Land & Investment Ltd. (688), the nation’s biggest developer listed in Hong Kong, declined 3.3 percent, the most since Feb. 13.

Some Chinese developers are allowing first-time home buyers to delay their down payments to boost sales, China Business News reported on Feb. 27, citing unidentified sales agents.

Developers in cities including Nanjing, Shenzhen, Guangzhou and Wuhan sold some projects with a 10 percent down payment, the newspaper reported. The sellers advanced the remaining 20 percent, which buyers don’t have to pay back for as long as three years in some cases, the newspaper said, citing agents and sales people it didn’t identify. First-home buyers in China need a minimum 30 percent down payment.

Home prices in the western city of Chengdu fell 1.1 percent from January, the biggest decline among China’s 10 biggest cities, while Beijing dropped 0.6 percent, according to SouFun.

The property market will remain challenging this year, though there won’t be a “collapse” as leading cities prove more resilient, according to a Citigroup Inc. report today, led by analyst Oscar Choi.