Property prices fall in more Chinese cities in July

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More cities reported lower or unchanged property prices in July amid renewed government efforts to cool the market, according to the National Bureau of Statistics (NBS).

In July, 31 cities out of the statistical pool of 70 major cities saw new home prices decline or remain unchanged from a month earlier, compared with 26 cities in June, the NBS said in a report on its website.

Fourteen cities saw month-on-month declines in new home prices in July, up from 12 in June. Meanwhile, prices in 17 cities, including Beijing and Hangzhou, remained unchanged, according to the NBS.

As for resold housing units, 22 cities reported second-hand home price declines month-on-month in July. Second-hand home prices stayed unchanged in 12 major cities in July from the previous month, according to the NBS.

Chen Sheng, vice president of the China Index Academy (CIA), said both developers and home buyers took a wait-and-see approach in the past two months, but it is clear that government curbing efforts will continue on pace or become even tougher in the future.

In its latest effort to curb property prices, the government has begun preparing home purchase restrictions for the country's second- and third-tier cities to prevent price growth in areas that attracted developers after property investments in first-tier cities faced harsh restrictions.

The Ministry of Housing and Urban-Rural Development on Wednesday provided five standards that will determine whether to impose such restrictions in smaller cities, including rapid growth in prices or transaction volume in the first half of the year.

As one market-cooling measure, the government previously restricted residents in 43 major cities from buying second or third homes, resulting in a decline in property transaction volume in many of these cities.

Chen expects property developers facing forthcoming restrictions to step up promotions and cut prices to boost sales in upcoming months, which is traditionally the peak season for property trading in China.

Some developers had been over-optimistic about this year's government policy trends and set high sales targets at the beginning of this year, while sales have been sluggish in the first half, said Shen Danlin, vice president of Shanghai Greentown Rose Garden Development Co., Ltd.

Shen said there will be further price cuts through the remainder of the year as developers rush to meet sales targets.

Chen said the new round of curbing measures is likely to be conducted in less than 30 new cities, citing CIA research.

If home prices fall by 20 percent in these cities, there will be a two percent drop nationwide, he said.

Yang Hongxu, an analyst with the Shanghai-based E-house China Research and Development Institute, said lower prices are likely to boost transactions.

With increased trading of affordable housing, Yang expects the trading volume of residential homes to grow by 10 percent this year.

Floor space transactions of commercial housing climbed 13.6 percent year-on-year to 520.37 million square meters during the first seven months. Of this total, 12.9 percent was in residential housing, according to earlier NBS data.

Investment in the nation's property sector rose 33.6 percent year-on-year to reach 3.19 trillion yuan, of which 2.28 trillion yuan went towards residential housing, resulting in a 36.4 percent increase from the same period last year.

China planned to begin building 10 million affordable-housing units this year. The construction of more than 5 million of these units had been started before the end of June.

Although further restrictions in smaller cities are likely to restrain property investment this year, the large-scale construction of affordable housing will offset the loss and reduce the impact on related sectors and the macro-economy, said Zhu Zhongyi, vice secretary-general of the China Real Estate Association.