China Home Prices Fall in More Than Half Cities Tracked

China’s home prices fell in a record 46 of 70 cities tracked by the government in April from a year earlier as officials pledged to keep restrictions on property purchases that have sapped buyer demand.

The eastern city of Wenzhou led declines with a 12.3 percent slump in values from a year earlier, while Beijing dropped 1 percent and Shanghai prices declined 1.3 percent, according to data released by the statistics bureau today.

The Housing Ministry said yesterday China will steadfastly continue curbs on the housing market and won’t flip-flop on its policies, Shanghai Securities Journal reported. This followed a pledge by the State Council, or Cabinet, last month to stick with existing property controls implemented over the past two years, where the government tightened down payments and mortgages, and imposed restrictions on the number of homes families can buy.

“The general price trend as a result of developers cutting prices and regulatory environment is continuing this month,”Chris Brooke, chief executive officer for Greater China at New York-based CBRE Group Inc. (CBG), said in a Bloomberg Television interview from Beijing. “The objective is to remove the speculative element from the market.”

The drop in April home prices compares with 37 cities that registered a decrease in March, according to today’s data. The bureau switched from a national average to individual figures for the 70 cities at the start of last year.

Wenzhou’s Drop

Wenzhou posted the biggest drop for the sixth month, according to the data. A credit squeeze on smaller businesses in the city prompted a visit and pledge of financial aid from Premier Wen Jiabao in October.

Private data also showed the home market continued to cool. April home prices fell to a 14-month, SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner, said on May 2. Residential values decrease 0.3 percent last month from March, the eighth month-on-month drop, said SouFun, which began compiling the figures in July 2010.

A gauge tracking property shares in Shanghai fell 1 percent as of 10:48 a.m., compared with a 1.1 percent loss for the Shanghai Composite Index.

Easing Funding

While the government maintained its housing curbs, it helped eased funding by lenders. The central bank lowered the amount of cash that banks must set aside as reserves three times since November to boost liquidity and spur loan growth.

Lenders in Beijing started offering mortgages to first-home buyers at or below the central bank’s benchmark rate in February, according to Bacic & 5i5j Group, Beijing’s second-biggest real estate brokerage.

“The government’s policy focus of helping first-home buyers is not going to revive the property market but only mitigate some of the pain,” said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc.

The eastern city of Yangzhou in Jiangsu province will offer new buyers subsidies of as much as 0.6 percent of the total value of a home, Xinhua Daily reported on May 8, citing the local finance bureau. Attempts by Wuhu in Anhui province and Foshan in the south in the past six months to lift local property curbs were halted within a week.

Not Enough

Prices haven’t fallen low enough for the government to relax the property policies, said Nomura’s Zhang.

Industrial & Commercial Bank of China Ltd. suspended a 15 percent discount on mortgage lending for first-time home buyers nationwide, the official Xinhua News Agency reported on May 5. The suspension was made to address tight liquidity and deposit instability and other Chinese banks may follow suit, Sophie Jiang, a Hong Kong-based banking analyst at Religare Capital Markets, said in a May 7 report.

“The government won’t back off from the property restrictions,” Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing, said before today’s release. “Right now the government can say this is all under control and intentional.”