House price boom continues in China

House prices may be in turmoil in the West, but China’s record boom rose sharply again last month despite government efforts to cool it, figures released today show.

Communist leaders have been trying for three years to halt a boom in housing costs that they worry could ignite a backlash if the poor are priced out of the market. But credit limits and curbs meant to discourage speculation and increase the supply of low-cost housing have failed to slow price rises.

Housing prices in 70 of China’s biggest cities rose 10.9% in February from the same month last year, the Cabinet’s National Development and Reform Commission reported.

Consumer inflation accelerated in February to 8.7% – its highest level in nearly 12 years – driven by a 23.3% jump in food costs, according to earlier government data.

Beijing has tried to cool the boom since early 2005, worried that runaway spending could leave banks buried under unpaid loans if developers default. But regulators have moved gradually to avoid disrupting economic growth.

Beijing has repeatedly raised interest rates, tightened lending standards, boosted minimum down payments on second homes and ordered developers to build more small, low-cost units.

In February, housing prices in some cities rose much faster than the average, according to the NDRC.

Prices in Urumqi in the desert north-west soared by 24.2%, in the port of Ningbo south of Shanghai by 18.9%, and in Beijing by 16.5%.

February’s rate of increase was 0.4% lower than January, the agency said.

“Housing price growth has been slowing as the government’s macroeconomic policy began to pay off in the fourth quarter last year,” the official Xinhua News Agency quoted said Qi Ji, a deputy construction minister, as saying.