BEIJING, Jan. 15 -- China's property prices rose at the fastest pace in 18 months in December, ending the year with rising fears of bubbles in the property market.
Housing prices in China's 70 large and medium-sized cities rose7.8 percent in December 2009 from a year earlier, and were up 1.5 percent compared to the previous month, said the National Bureau of Statistics (NBS) on Thursday.
The property price increase stood at 5.7 percent in November year-on-year, accelerating from the 3.9 percent in October.
"The growth is within expectation due to the low base of the property prices in December of 2008 amid the ongoing global economic downturn", said Hao Daming, an economist with the China Galaxy Securities.
The country's property market was depressed by the global economic downturn at the end of 2008, with property prices in the 70 major cities down 0.4 percent year on year in December and down0.5 percent from the previous month.
The hike was also a result purchase rush in the fourth quarter on expectations of tightening policies, he said.
Prices of second-hand homes rose 6.8 percent in December from a year earlier and 1.0 percent from a year ago, according to the NBS. Prices of new houses in December rose 9.1 percent from the same month last year, and were up 1.9 percent from November.
The climbing property prices, driven up by record high bank lending, favorable policies and speculation, has become a headache for Chinese residents and also stirred up concerns of a property bubble.
Chinese Premier Wen Jiabao said in December that housing prices in some cities were rising too fast, which drew "great attention" of the central government. Wen pledged to cool property prices with tools of taxes, interest rates and land policies.
Since December the government has made a series of moves to cool the market, including reimposing a sales tax on homes sold within five years of their purchase from this year and increasing the down payment requirement for land purchases to at least 50 percent of the total price.
The latest one came from the State Council which issued guidelines over the weekend that strictly required the down payment at no less than 40 percent for those applying to buy a second or more houses backed with loans.
The government also renewed its pledge on Wednesday to stabilize home prices by providing more affordable housing and cracking down on speculation.
The People's Bank of China, the central bank, announced on Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points from Jan. 18 this year, aiming at pace lending.
"This move would not have a major impact on the property market as property developers have already earned enough money from their surging sales this year", Hao said.
China Vanke, the country's largest real estate developer by market value, said earlier this month that its sales jumped 32.5 percent to 63.42 billion yuan (9.29 billion U.S. dollars) in 2009.
"Given the demand-supply gap is still evident, the growing trend in prices would likely continue in the first half of this year," he added.
Chinese Academy of Social Sciences, a think tank, said in a report in November that housing prices in China would keep rising in 2010, helped by a renewed surge in bank lending.
The traditional rush by banks to lend at the start of the year would be on full display in early 2010, with monetary policy still relatively loose, it said.
"The property market may ebb slightly and stabilize in the second half of 2010 after China moves to tighten monetary policy," the report said.
Yang Hongxu, an expert from the E-house China Research and Development Institute, said the month-on-month growth of prices in January would narrow from December because of slowed sales on seasonal factors and policies introduced.
The prices would still record a fast year-on-year growth as housing prices in the first quarter of 2009 fell.
Yang expected more adjustments in the property market to come through this year on policies targeting the market.
"The most important thing the government can do to stabilize property prices is to increase supply of affordable housing", Hao said.