Property prices rising in major cities

Heavier government intervention likely in the coming months

Property prices in China's major cities continued to rise on a monthly and yearly basis in May, indicating pressure for further increases despite government's rigorous price-control measures.

The average price of new homes in 100 cities monitored was 10,180 yuan ($1,642) per square meter in May, up 0.81 percent on the previous month, according to figures released on Monday by China Index Academy, a Beijing-based real estate research institute.

It was the 12th consecutive price increase month-on-month. However, the growth rate fell 0.19 percentage points from April.

Seventy-seven cities saw price rises on a monthly basis, compared with 76 in April. On a yearly basis, growth was 6.9 percent last month compared with a 5.34 percent year-on-year increase in April.

The average house price in key cities, including Beijing and Shanghai, was 17,202 yuan per square meter, an increase of 1.05 percent from the previous month and up 9.68 percent on the same period last year.

"With the market's expectation for a continuous loosened monetary policy due to the weaker than expected economy, most people are still forecasting a further home price hike," said Huang Yu, the academy's vice-president. "And the recent soaring price of land and limited supply in key cities further strengthen such expectations."

Property transactions in Beijing rebounded in May, a report from real estate brokerage Century 21 showed. A total of 13,000 new homes were sold and registered online in the month, up 18 percent on April. Sales of pre-owned homes rose by 12.8 percent month-on-month.

Meanwhile, both transactions and prices of high-end apartments increased. Sales of apartments valued at more than 10 million yuan ($1.61 million) accounted for 39 percent of the high-end residential market last month, much higher than the same period last year, according to a report by Yahao Real Estate Selling and Consulting Solution Agency.

Sale prices for 10 out of 56 luxury apartments were raised by 1,000 yuan to 2,000 yuan per square meter last month, the report showed

"As most high-end apartment projects have been completed, it is not necessary for the property developer to get the pre-sale permit from the local government," said a marketing manager at Jin Mao Palace, a high-end residential project on the capital's eastern Fourth Ring Road. The manager spoke on condition of anonymity.

The Beijing municipal government has said it will not grant sales licenses to projects priced "much higher" than the average rate in the region.

Jin Mao Palace, for instance, has just launched 34 apartments on the market, with the average price for each being more than 25 million yuan, higher than previous sales.

Meanwhile, the land market is also sizzling, indicating pressure for further home price rises. Land transfer fees in the country's four key cities in the first five months of this year were 141.18 billion yuan, up 350 percent on the same period last year, according to real estate service provider Centaline Group.

Soaring sales, improved cash flow and developers' confidence in the market are the major drivers for those eager to boost land banks, analysts said.

Liu Chunyan, general manager of World Union Property Consulting Co (North China), said: "If home prices and sales continue to pick up in the second half, the government may roll out more rigorous measures to cool the market, such as expanding the scope of property tax and further tightening loans to property developers."