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China’s new home prices in January grew fastest since September driven by top cities despite government cooling measures

China’s home prices grew at a faster pace in January, led by red-hot housing markets in the country’s top cities even after the government announced several rounds of cooling measures.

Average new home prices in 70 major cities increased 0.3 per cent in January from a month earlier, the fastest growth since September, according to calculations based on data released by the National Bureau of Statistics on Tuesday, accelerating from a 0.1 per cent gain in the previous month.

On a year-on-year basis, new home prices rose 3.9 per cent, picking up from a 3.8 per cent gain in December.

Of the 70 largest cities, new home prices in 53 cities rose in January month on month, more than 42 cities seen in the previous month, according to the NBS. Jinhua city in eastern China’s Zhejiang province led the gains, where home prices increased 1.2 per cent in January from the month before.

The relentless upward price pressure was again mainly driven by bigger cities. New home prices in the four tier-one cities rose 0.6 per cent in January from the previous month, accelerating from the 0.3 per cent growth in the previous month, said the NBS. In breakdown, new home prices in Beijing, Shanghai, Guangzhou and Shenzhen rose 0.5 per cent, 0.6 per cent, 1 per cent and 0.3 per cent, respectively.

Second-hand home prices in the four cities rose 1.3 per cent month on month in January, picking up for the 0.6 per cent growth in the month before. In breakdown, second-hand home prices in Beijing, Shanghai, Guangzhou and Shenzhen rose 0.9 per cent, 1.3 per cent, 1.4 per cent and 1.7 per cent, respectively.

New home and second-hand home prices in the country’s 31 tier-2 cities both rose 0.4 per cent in January from the previous month, quickening from the 0.1 per cent gain in December.

New home prices in the 35 tier-3 cities rose 0.2 per cent in January from a month earlier, picking up from the 0.1 per cent gain in December, and second-hand home prices in the cities rose 0.3 per cent, accelerating from the 0.2 per cent rise a month earlier, according to the NBS.

The acceleration in the growth of home prices came after authorities have stepped up curbs on the property sector to safeguard against financial risks as concerns grow of a speculative bubble in some parts of the market.

The price uptick at the beginning of the year can be mainly attributed to the record volume of credit issued in January, said Zhang Dawei, an analyst with property agency Centaline.

“The flows of business loans, which enjoy a huge interest rate spread with the normal mortgages, into the property sector, have particularly fuelled the upward pressure in top-tier cities.”

Central bank data showed China’s new bank loans leapt to new highs in January boosted by seasonal demand, with household loans, mostly mortgages, more than double the level seen in December.

Data released by the China Index Academy earlier this month showed that the average new home prices in China’s top 100 cities increased 0.37 per cent in January from the month before, quickening by 0.12 percentage points from December last year. On a year on year basis, new home prices in the cities rose 3.56 per cent, faster than the 3.4 per cent gain a month earlier.

The average second-hand home prices in the 100 cities rose 0.32 per cent in January month over month, picking up by 0.04 percentage points from the month before, according to the academy. The price rose 3.22 per cent from a year earlier, 0.24 percentage points higher than the previous month, showed the data.

The fast heating-up of the housing market has raised concerns about financial risks and policymakers have since then tightened screws on the funnelling of funds into the sector.

In December last year, the authorities unveiled the new rules to cap banks’ lending to the real estate sector. Last month, regulators in major cities including Shanghai, Shenzhen and Beijing announced tighter regulations to close loopholes in home transactions and contain illegal flows of funds into the sector. These steps came on top of a slew of measures it took last year.

China’s home mortgage rates rose for the first time in 13 months in February after authorities imposed caps on banks’ lending to the real estate sector as the housing markets heat up.

The average home mortgage rates for first-time home buyers increased to 5.26 per cent in February (January 21 – February 18), up 4 basis points from the previous month, according to a report released by the online financial service platform Rong360 based on a survey of 674 bank branches in the country’s 41 major cities.

The average home mortgage rate for second-home buyers rose to 5.56 per cent during the period, 3 basis points higher than the month before, according to the report.

Mortgage rates in 18 of the 41 cities rose, with rates in 6 of the cities rising by more than 10 basis points, according to the report. The rates remained unchanged in February in 18 cities and dropped in only five cities, the report showed.

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