China's home prices show signs of softening

China's efforts to cool its red-hot real estate market showed signs of working in February, as government data Friday showed more cities seeing a fall in house prices from the previous month. The figures could mean Beijing will hold off any further measures to rein in prices in the near term, analysts said, after a series of measures over recent months.
The cost of a newly built home in eight of the 70 major cities tracked fell in February from January, the National Bureau of Statistics said. Just three cities had shown a decline in January. While prices in 68 cities rose last month from February 2010, analysts said the month-on-month data showed official measures to rein in soaring house prices were kicking in.
"The administrative measures are taking effect. With restrictions on purchases of homes in full play, transactions are likely to remain very weak in coming months," said Huang Yumei, an analyst at Debon Securities. The government has implemented a number of measures to restrain the market including bans on purchases of second homes in some cities and a property tax trial in Shanghai and the south-western mega-city of Chongqing.
Fifty-six cities saw prices rise in February from the previous month, compared with 60 cities in January, according to the statement. Prices in Beijing rose 0.4 percent in February from January, slower than the 0.8 percent month-on-month increase in January. Shanghai recorded a 0.9 percent increase for the second straight month.
Huang said the apparently softening property data meant no further tightening steps were likely in the near-term. "Now the focus of the government is to accelerate construction of affordable housing, which will give it more leeway in controlling the property market without causing a collapse," he said.
Premier Wen Jiabao promised in an address to the nation's legislature this month that the government would ramp up a campaign to construct affordable housing amid growing public concern over rising prices. China this year scrapped a nation-wide property index and instead now publishes price changes for individual cities. The earlier method, which gave an average of prices nation-wide, had been criticised for understating the severity of the country's property price surge by diluting large spikes in big cities with tamer changes in smaller ones.