While Chinese property stocks came under pressure on Monday on fears that recent strength in the mainland real estate market would prompt measures to restrict home prices, analysts tell CNBC fresh curbs are unlikely as economic growth remains top priority for policymakers.
New home prices in the 70 cities surveyed by the National Bureau of Statistics in July from June – the second month of gains – helped by interest rate cuts and buyers looking to upgrade their homes, data released over the weekend showed.
This led to some speculation that an uptick in housing prices will complicate policy matters for Beijing that looks to cool the real estate sector while boosting growth.
“The rise in home prices doesn’t complicate the outlook for policy easing, they (policymakers) will still simulate the economy because it’s in a bad shape…the control on property prices will take a backseat,” Du Jinsong, Head of Asia Property Research at Credit Suisse told CNBC.
Du says that while policymakers will keep trying to “talk down” prices, fresh curbs will not be introduced until the economy stabilizes.
Premier Wen Jiabao in recent months has repeatedly said that China must continue its property controls and prevent prices from rebounding. Housing affordability remains a key issue in the mainland particularly in the current year of leadership transition.
China already has numerous , including limiting the number of units households can buy in major cities and curbing purchases by non-residents.
Alvin Wong, Property Analyst at Nomura, says new tightening measures in the current environment of slowing growth are unlikely as they could hinder investment into the property sector, which is a major contributor to economic growth. Investment in the property sector accounted for 13.6 percent of the country’s gross domestic product (GDP) in the first half of 2012.
He adds that the recent rise in home prices isn’t great enough to warrant action from the government, pointing to the year-on-year data, which showed property prices in July fell 1.5 percent from a year earlier.
Joe Zhou, Head of Research, Shanghai, at Jones Lang LaSalle, who expects overall home prices in China to remain flat this year, says there is a large amount of residential supply in the pipeline in most cities across the country, which limits the risk of large price gains and hence the need for renewed restrictions
Zhou, in fact expects to see continued loosening of mortgage policies to help improve the affordability for first time home buyers.
“Some banks are offering 15 percent discount on mortgage rates for first time home buyers...they might continue to offer more discounts,” Zhou said.
The People’s Bank of China permits loans to first-home buyers at a discount to the benchmark lending rate.