The Chinese government is not having great success trying to cool off the property market. Property values have been increasing for the past four months in China's major cities. According to the National Bureau of Statistics, home sales are also increasing steadily.
In an effort to curb lending, the central bank has increased interest rates two times since October and experts predict that more hikes will occur this year. The central bank has also raised the amount of money banks need to keep in reserve in a bid to curtail lending.
Wei Yao, China economist at Societe Generale, states that gradually increasing interest rates is necessary to curb excessive lending. She anticipates perhaps three or four more rate hikes this year.
With interest-rate hikes and other initiatives, the government has been trying to boost supply as well as slow down demand last year and will continue in 2011. Curbing property price gains is the aim and plans to continue with tight policies remains.
A 5-7 percent gain in property prices is predicted for 2011. Demand seems to be outweighing supply currently, which is good news for developers but the new measures may make it a bit more difficult for them.
The government has introduced about 15 initiatives and measures in 2010 but some were not implemented well. Prices have remained stable and resilient though.
This year some of the same initiatives will actually be implemented with the hopes to keep home prices at a reasonable price. Experts are optimistic that with the government's efforts, the property market will return to a reasonable level.