China Property Prices Rise amid Rate Cuts

Policy easing, including two interest rate cuts in the months of June and July, in a bid to catalyze economic growth resulted in a rise in property prices in China.

New home prices rose in 50 cities, compared to the previous month, figures released over the weekend showed.

Home buyers have been looking to take advantage of the recent cuts in borrowing costs.

The government has been trying to curb speculation in the property sector to prevent formation of asset bubbles.

According to Patrick Chovanec of Tsinghua University, the property sector is still faced with fundamental issues that suggest there will be further downward pressure.

The first issue is that China’s developers hold lots of unsold inventory and desperately need to sell those to raise cash to pay off debts.

Second, a lot of the growth in demand due to urbanization and rising incomes has already been anticipated by the market, both in terms of construction and prices.

Both these issues would most likely result in lowering property prices in the near term.