Property Prices in China Begin to Rise Again

The average price of housing in 70 cities in China increased in July for the second straight month leading to speculation that property prices have already bottomed out. However experts feel the government is unlikely to let prices rise to much, and will act to curb any return to speculative buying.

Data provider China Real Estate Index System surveyed real estate firms and property developers and found the average price of housing was $1,369 per square metre in July, an increase of 0.33% on June.

Analysts have also noticed some property showrooms have been very crowded during project launches, as an easing of property curbs seems to have resulted in increased sales numbers which in turn is driving up prices. Property prices rose in 70 cities, but fell in 30 cities compared to the previous month. The largest increases were seen in smaller cities, with Liaocheng and Wuhu city posting increases of 2.7% and 2.67% respectively.

These price increases haven't gone unnoticed by central government who is already warning local governments to tighten up the property curbs.

The news for August may be a little better for the government as it's typically quiet and prices could moderate. Overall experts still think there could be some downward pressure on prices, and that average prices will remain flat compared to the last few years.

The government still remains adamant over curbing investment demand and is doing its best to make sure that homes are for real use rather than just for investment. It predicted that inventory levels will peak during the fourth quarter and that this will keep prices from rising too quickly.

Construction Spending Unexpectedly Rises in the US, but the Housing Market Remains Flat

Spending on construction rose in August due to an increase in state and local government spending, giving a 1.4% gain which reversed the 1.4% loss in July. The construction industry is also up 1.4% compared to July 2010 which is its first positive reading of the year.

Building of multi-family homes such as townhouses and apartments has increased, which is greater evidence of how the housing market has changed as more Americans are choosing to rent rather than buy. Even so, spending on public construction was down 5.3% compared to August 2010 which is mainly due to budget cuts.

The housing market continues to struggle, and work began on 571,000 new homes in August which is the weakest figure for three months. Most experts don't expect the housing market to improve in the near future, and purchases of new homes reached a six-month low in August even though prices fell by an average of 7.7% compared to August 2010 which is the largest fall since July 2009. The problem is that distressed properties still appear far more tempting to potential buyers.

The Federal Reserve is aiming to cut borrowing costs and to kick start housing and refinancing, and last month it announced it would take additional steps to reinvest maturing mortgage debt into mortgage backed securities instead of Treasuries. However government agencies remain under pressure to cut their spending, especially as property tax collections which is the main source of income for many cities and counties fell by 1.2% during the second quarter, which is the third consecutive decline.

Home Sales in California Increase in August

The number of home sales in California increased by 8.8% in August compared to July, and by 10.2% compared to August 2010, and all in all an estimated 37,734 homes were sold throughout the state.

The average number of sales for August is 48,344 according to DataQuick who has been keeping statistics since 1988. Sales reached an all-time low in 1992 with just 29,764 homes being sold and an all-time high of 73,285 in 2005.

The median price for a Californian home was $249,000 in August, a decrease of 1.2% compared to July, and a decrease of 4.2% on August 2010. House prices have decreased for 11 months in a row after 11 months of increases.

The lowest price for this housing cycle was recorded in April 2009 when prices were just $221,000, compared to the peak in early 2007 of $484,000, and property prices are still being affected by the large number of distress sales which accounted for more than 50% of the resale market in August.

Foreclosures accounted for 34.6% of existing house sales last month, down from 35.6% in August 2010. The highest recorded figure for foreclosures was in debris 2009, at 58.5%. Shop sales accounted for 17.8% of resales in August, down from 18% in August 2010.

Homebuyers are also taking out smaller mortgages, as the typical mortgage payment for August was just $982, which is the lowest amount on record, down from $1045 in August 2010. This is a massive 64.4% less than the peak of the current cycle which was reached in June 2006.