Home prices in major Chinese cities have declined in 10 out of the past 11 months, a survey by the China Index Academy showed last month, raising concerns over the profitability of developersHome prices in major Chinese cities have declined in 10 out of the past 11 months, a survey by the China Index Academy showed last month, raising concerns over the profitability of developers (AFP Photo/Wang Zhao)
China's decline in property prices accelerated in July, an independent survey showed, adding to concerns over the sector, a key component of the world's second-largest economy. The average price of a new home in 100 major cities was 10,835 yuan ($1,757) per square metre last month, down 0.81 percent from June, the China Index Academy (CIA) said. It was the third consecutive monthly decline and an acceleration from the falls of 0.50 percent in June and 0.32 percent in May, which was the first in nearly two years, according to CIA data. In July, prices dropped in 76 cities and rose in just 24, compared with 71 versus 29 in the previous month, it added. All of China's 10 biggest cities posted month-on-month falls, with the average price in Beijing dropping 1.6 percent to 32,736 yuan per square metre. "Pressured by high inventory levels and elevated debt ratios, most property developers adopted a price cut strategy to boost sales," said CIA, the research unit of real estate website operator Soufun. "On the demand side, consumers still expected the market to continue to go down, leading to low buying desire." China has long sought to contain rising property prices, while also promising to increase the supply of affordable housing, as surging costs stoke discontent among ordinary citizens unable to afford new homes. Market control measures have included restrictions on purchases of second and third homes, higher minimum down-payments and taxes in some cities on multiple and non-locally owned homes. At the same time, local governments which make much of their income from land sales to developers have sought to find ways to loosen limits when property prices have fallen. The city of Hohhot in the northern region of Inner Mongolia in June became the first to drop restrictions on the purchase of second homes, and more municipalities have since followed suit. Woes in the huge but troubled property sector, which has been a key driver of Chinese growth, have sparked concerns over the prospects of the overall economy, which slowly bottomed out in the second quarter from a downturn in the January-March period. Year-on-year, prices in the surveyed cities rose 4.72 percent in July, 1.76 points lower than the annual rise in June and the seventh month of shrinking yearly increases, said CIA.