SHANGHAI (Dow Jones)--China's property prices rose at the fastest pace on record in April but likely peaked as the tightening measures announced by Beijing in recent weeks will gradually have an effect.
Though the price rises were within expectations, China may need to take stronger measures, including an interest-rate hike, to prevent an asset bubble threatening both long-term economic growth and social stability, economists said.
Property prices in 70 of China's large and medium-sized cities rose 12.8% in April from a year earlier, the National Bureau of Statistics said Tuesday, the biggest increase since China started issuing the data in July 2005, and higher than March's 11.7% rise.
April was the 11th consecutive month in which urban property prices have increased from a year earlier, though the latest survey of prices predated some of the government's recent measures to cool the market, including mortgage restrictions and curbs on purchases of second and subsequent homes.
"Every time property data comes out strong, people start worrying that harsher policy measures will follow. Right now, we're expecting key macroeconomic tightening in terms of a hike in interest rates, as well as local government-imposed restrictions," said Wu Jianxiong, an analyst from Central China Securities.
Prices in April rose 1.4% from the previous month, picking up from a 1.1% sequential rise in March, the statistics bureau said.
"The latest round of these fine-tuning measures were only put in place a few weeks ago, so it is probably too soon to judge their effectiveness, but Beijing is clearly playing with fire by avoiding broader policy tightening to deal with price pressures in the economy," said Brian Jackson, an analyst from RBC Capital Markets.
However, transaction volumes have fallen in some tier one cities such as Beijing, Shanghai and Shenzhen in recent weeks, according to various private-sector estimates.
"Transaction volumes have taken a hit, and though I haven't seen any meaningful discounts, these are signs that perhaps the market is reaching a point when prices start to stabilise," said Matthew Fang, an analyst from Guosen Securities.
Qi Ji, a vice minister at the Ministry of Housing and Urban-Rural Development, said during an online discussion with Chinese Internet users on May 7 that the government's recent measures have been effective in reining in overly fast home-price rises in some cities.
The statistics bureau said investment in real-estate development, one of the main forms of private investment in China, rose 36.2% to CNY993.2 billion ($145.5 billion) in the January-April period from a year earlier. Investment in real-estate development in the January-March period rose 35.1% to CNY659.4 billion.
Prices of newly built residential properties rose 15.4% in April from a year earlier, higher than the 14.2% rise in March, the bureau said. Prices in the secondary market rose 10.5% from a year earlier, accelerating from March's 9.5% rise.
In April, prices of newly built residential properties rose the most in the southern island province of Hainan, a popular tourist destination. Prices in the provincial capital Haikou rose 64.3% from a year earlier and those in the resort city of Sanya rose 58.2%. Prices in Wenzhou, a city in the coastal province of Zhejiang, rose 26.1%, and prices in Jinhua, a city in the same province, rose 23.8%.
