Potential buyers examine a model of a residential development at a housing fair in Shanghai. New data indicates that property prices in China's first-tier cities declined in August. Qilai Shen / Bloomberg

BEIJING - Property prices in China's first-tier cities declined 0.41 percent in August, the first month-on-month drop since September 2010, statistics released on Thursday by the China Index Academy show.

According to the Beijing-based property research institution, the average property price in China's 10 major cities stood at 15,773 yuan ($2,472) a square meter last month, down 0.41 percent from July. Though prices continue to rise in three of the 10 cities - Guangzhou, Wuhan and Beijing - the rate of increase is less than 0.6 percent, according to the institution's data.

Meanwhile, about 60 of the 100 cities surveyed by the institution experienced a year-on-year decline in the price growth rate, which was also smaller than that of July.

The price decline, industry analysts said, came about from the rigorous real estate policies and the government's determination to continue these measures.

The country needs to focus on its efforts to rein in housing price gains in second- and third-tier cities, Chinese Premier Wen Jiabao said in an essay on Thursday.

"We must unswervingly curb irrational housing demand, continue to strictly implement differential housing loans, tax policies and restrictions on purchases," Wen wrote in Qiushi magazine, an official publication.

China has launched a series of measures to curb property price gains since the end of last year, such as raising downpayments requirements and mortgage rates for second-home buyers and restricting the amount of homes a family may purchase. Last month, the government said it will rein in residential prices in second- and third-tier cities by expanding home purchase restrictions from the major cities to the smaller ones.

"At the same time, we need to focus on suppressing overly rapid price gains in second- and third-tier cities to promote a return to reasonable home prices," Wen said in the article.

According to WorldUnion Property Consultancy Co Ltd, more property developers will cut prices in the second half of this year due to the government's efforts to curb price growth.

"Probably, transactions will rebound in the rest of the year as prices fall," said Wang Haibin, chief analyst at World -Union. "From our observation, in most cases, a 10 percent price drop could greatly stimulate sales."

For Qin Xiaomei, chief researcher at the international real estate service provider Jones Lang LaSalle, a big price decline is not likely because demand remains strong.

"Meanwhile, the price fluctuation in different types of products and projects in different locations will be different. Those quality, high-end homes with a prime location will remain stable," Qin said.

High-end villas in Beijing developed by Sino-Ocean Land Holding Ltd, for instance, were fetching 600 million yuan in June and July, beating the company's expectations in the sluggish market.

China Daily

(China Daily 09/02/2011 page13)