BEIJING — Chinese property prices rose at the fastest pace in nearly five years in March, according to official data Wednesday that is likely to add to concerns of a bubble developing in the real estate market.
The news has increased speculation that the government will soon increase interest rates as it tries to rein in credit and put the brakes on the soaring economy.
Analysts have forecast a rate hike as early as this month after massive bank lending in 2009 triggered fears that the cash flood has fed a spending spree by property speculators.
Prices in major cities rose 11.7 percent year-on-year in March, the National Bureau of Statistics said on its website, marking the biggest year-on-year rise for a single month since the survey was widened to 70 cities in July 2005.
That topped the 10.7 percent increase in residential and commercial property prices recorded in February and the 9.5 percent jump in January.
The figures prompted senior leaders to renew an earlier pledge to step up efforts to rein in runaway prices amid growing complaints that apartment prices are out of reach for many people.
The State Council, or cabinet, vowed to “firmly curb the fast-rising housing prices” to ensure the “healthy development of the real estate market”, according to statement issued after a meeting chaired by Premier Wen Jiabao.
New loans issued by Chinese banks in March fell to 510.7 billion yuan from the previous month, official figures show, suggesting the government’s efforts to curb lending were bearing fruit.
But homebuyers and property developers were not getting the message and more drastic measures like interest rate hikes were needed to calm market activity, said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong.
“Today’s data affirms anecdotal reports that activity and sentiment remain robust,” said Jackson.
“To convince homebuyers that it is fully committed to curbing overheating and reducing bubble risks, Beijing will need to use all of its policy tools, and that most obviously includes higher interest rates.”
Prices of new homes rose by 15.9 percent year-on-year in March, the statistics bureau said. Haikou, a city on the tropical southern island of Hainan, recorded the biggest price jump, up 64.8 percent from a year ago.
Sanya, another city on Hainan, saw prices soar 57.5 percent year-on-year.
Property sales in the first three months of the year surged 57.7 percent to 797.7 billion yuan from the same period last year, it said.
Investment in real estate development rose 35.1 percent to 659.4 billion yuan over that period.
In an effort to rein in prices, Beijing has been restricting lending, requiring buyers of second homes to pay a deposit of at least 40 percent, and hiking interest rates on mortgage loans.
“Clearly, these have had minimal impact,” said Alaistair Chan, associate economist at Moody’s Economy.com in Sydney.
“Part of the reason that property prices are high is the belief among developers that the government will not allow prices to fall.”
China has reportedly launched a five-month crackdown on the real estate industry, targeting land hoarding and price speculation.
Investigators will look for irregularities in local government land transfers and failure by real estate companies to develop their holdings in accordance with transfer approvals, state media reported last month.
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