China new home price increase picks up in August

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Beijing (AFP)

Increases in new home prices in China picked up in August from a month ago, a survey showed Thursday, raising worries of further rises in major cities.

The average price for new homes in 100 major cities gained 2.17 percent month-on-month in August to 12,270 yuan ($1,837) per square metre, the China Index Academy (CIA) said in a statement.

It accelerated from a rise of 1.63 percent in July.

Real estate is a key sector for China's economy, the world's second largest and a vital driver of global growth.

Beset by property market problems, a sluggish manufacturing sector and mounting debt, China's economy is growing at its slowest rate in a quarter of a century, and concerns about its health have roiled global markets.

Authorities have introduced several policies to try to revitalise the property sector, including reducing minimum downpayment requirements, cutting transaction taxes and providing incentives for migrant workers to buy homes.

The policy loosening led prices in some big cities to rise this year as pent-up demand was unleashed. But at the same time the country has a huge inventory of unsold new homes, mostly in third- and fourth-tier cities.

The government has vowed to take "specialised" measures to tackle diverging trends in different regions.

Cities in richer regions including the Yangtze River Delta and Pearl River Delta led the increase in August, while others stimulated buying by loosening mortgage policies or handing out subsidies, the CIA said.

"Both market supply and demand are expected to continue to go up" as the peak sales season comes in September and October, "hopefully leading to a sustained increasing trend in the average (new) home prices", it said.

Land prices in first- and second-tier cities have been hitting new highs, it said, adding: "More cities may impose tightening policies in future."

Some places including the commercial hub Shanghai have introduced or hinted at policies to tighten the market after property and land prices surged in their localities.

Year-on-year, new home prices in China rose 13.75 percent last month, up from an increase of 12.39 percent in July, the CIA said.