China’s home prices slumped by the largest amount for nearly two years as the government pledged to maintain curbs on property, according to the country’s biggest real-estate website owner, SouFun Holdings.

Home prices dropped 0.3 percent last month from January, according to SouFun. The month-on-month decline in February was the sixth straight drop, the longest losing streak since SouFun started tracking the data.

Residential prices slid in 72 of 100 cities tracked by the company last month, 12 more than in January, it said in an e-mailed statement today.

Home prices in the western city of Chengdu fell 1.1 percent from January, the biggest decline among China’s 10 biggest cities. Beijing dropped 0.6 percent. According to property consultant Shanghai UWin Real Estate Information Services, Shanghai new home prices plummeted 12 percent month-on-month.

Average home prices nationwide in February were only up by 0.93 percent to 8,767 yuan ($1,391) per square metre compared to the same period last year, the slowest pace of growth since August.

Zhao Zhenyi, a Shanghai-based property analyst at Yuanta Securities said: “Home prices will continue to fall in the coming months because it’s pretty clear that the central government won’t ease the tightening soon”.

The property market will remain challenging this year, though there won’t be a “collapse” as leading cities prove more resilient, according to a Citigroup Inc. report today, led by analyst Oscar Choi.

Source: Overseas Property Professional

Chinese investors are grabbing everything from US$68,000 foreclosed condominiums in Florida to US$2-million beachfront villas in Vietnam, a buying spree fueled by China’s surging wealth that mirrors the country’s expanding influence in markets for gold, oil and food. The search for overseas property accelerated in the past seven months as the governments in Hong Kong and Beijing imposed purchasing and financing limits, steps that are starting to cool off domestic markets.

Buyers from China have come to international property investing much later than their counterparts in Hong Kong, who are wealthier and have a more easily convertible currency.

“The purchase restrictions in China drove them overseas, while they look for investments to counter the inflation,” said Mo Tianquan, founder and chairman of Beijing-based SouFun Holdings Ltd., which runs China’s biggest real estate website and organizes buying excursions abroad. “Some of them will buy homes considering better education opportunities for their kids, while others look for immigration options.”

Full the full article, please see Chinese on global homebuying spree.

China’s residential property prices have remained resilient despite government tightening measures because of a number of loopholes, according to a report from ratings agency Fitch Ratings.

The Chinese Residential Real Estate Q and A highlights the measures employed by the government, and looks at the reasons why they are failing. For example, the central bank cut lending limits for mortgages, but this has not had as much as an effect as it should have because many buyers are cash buyers. According to the report, Fitch estimates “that this proportion of cash payment is in the region of 30% to 50% of new-build purchasers.”

Another mortgage condition that has been introduced is the banning of financing on second and third properties, but, according to Fitch, “families may arrange their purchase to evade this restriction, through extended family members or artificial divorce.”

Developers have also been hit with curbing measures – banks are prevented from lending to developers for the purchase of land, so they can only borrow to construct. However, according to Fitch, “developers can still raise equity, domestic bonds or offshore funds. Discipline on the lender side may be more patchy for smaller, rural banks where local governments may be more influential.”

Tax increases on homes sold less than five years after purchase have also failed, because the returns are so good that a 5% tax is not enough of a deterrent. Fitch’s report says: “Tax rates in this bracket are not a major deterrent for those looking to long-term appreciations, or if short-term appreciation expectations are above 15%.”

Fitch Ratings says the overall effect of these measures has been to drive people away from major metropolitan areas towards China’s interior, and the demand has simply been exported. OPP recently reported on the rising home values in the interior of mainland China. During February, the price of a new home in the central city of Yueyang jumped by 12% year-on-year according to figures from the Chinese National Statistics Bureau.

The government is now monitoring home prices in 70 cities. The western city of Lanzhou rose 11% in February versus 6.8% in Beijing for instance, while Shanghai rose only 2.3% … a lower rate of increase than 80% of the cities tracked.

“Strict property measures in major cities have driven buyers to smaller cities,” says Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd. “That raised inflation pressure in those cities.”

One measure that has been effective thus far is residency limits, for example to buy a property in Beijing it is necessary to show five years of tax returns. Fitch’s report says this is “extremely effective in the near-term, driving sales volumes down significantly.” However, the report questions how sustainable this policy will be long-term and how it will fit into other government policies including labour mobility.

Sales and prices increased last year, according to the latest figures. China Vanke Co, the largest real estate company in China, said its sales in 2010 rose 70.5% to 108.2 billion yuan. The country’s second largest developer, Poly Real Estate Group Co, revealed a 52.53% increase in sales in 2010, totalling 66.17 billion yuan. The third largest, Gemdale Corp, also posted an increase in sales of 34.6% to 28.34 billion.

Prices were up 7.7% year-on-year in November in China’s 70 cities, according to figures from the National Bureau of Statistics. The housing market in China looks set to grow, as the country continues with its economic expansion. The World Bank’s predictions, which were released this week, forecast 8.5% growth in China this year. The report said: “East Asia is well positioned to enjoy further years of strong – albeit more moderate growth over the period to 2012. China will remain the focal point of regional activity.”

Source: OPP