Property curbs raise concern over growth

China's real estate investment growth slowed in the first quarter of 2013, and some analysts expressed concern that rigorous property curbs may drag down economic growth.

Despite a year-on-year increase of 20.2 percent in real estate investment in the first quarter of 2013, the growth rate was down 3.3 percentage points compared with the same period last year and 2.6 percentage points lower than the first two months this year, the National Bureau of Statistics said on Monday.

Revenues from property sales in the country rose 61.3 percent, compared with a 77.6 percent rise in January and February combined, according to the bureau.

Given the weaker-than-expected performance of China's economy in the first quarter, some economists are worried that the newly launched property policies could drag down the economy further.

China's GDP growth in the first quarter eased to 7.7 percent year-on-year, down from 7.9 percent in the fourth quarter last year, suggesting that the economic recovery remains fragile.

That also added to pressure on the authorities to ease policy restrictions to help make the recovery more solid, said a research note from Moody's Analytics, a division of Moody's Corp engaged in economic research and analysis.

"Stronger money supply and bank lending data suggest monetary conditions are accommodative. Yet tighter restrictions on home buying appear to be thwarting a full-fledged recovery in residential construction, which is pulling on demand for steelmaking, metals and cement products," said Alaistair Chan, an economist at Moody's Analytics.

Yang Hongxu, vice-president of Shanghai-based research institute E-house China, said the weaker GDP data might be good news for the real estate sector as the government may not roll out more rigorous measures to cool down the industry.

The central government said on March 1 that it planned to introduce a 20 percent capital gains tax and higher down payments and mortgage rates for second-home buyers in cities where prices were deemed to be rising too fast.

Property prices in China's major cities saw a 10th consecutive monthly increase in March, according to Beijing-based real estate research institute China Index Academy.

The average price of new homes in 100 monitored cities was 9,998 yuan ($1,600) per square meter in March, up 1.06 percent on the previous month.

The country's major cities have unveiled detailed regulations following the introduction of the State Council's measures to cool the sizzling real estate market.

Zhou Hao, an economist with ANZ, said economic growth momentum is likely to pick up in the second quarter on robust investment growth in the first quarter.

"But the economy in the short term still faces some downside risks," said Zhou, pointing to the outbreak of bird flu and signs of slowed investment momentum, all of which could significantly sidetrack second quarter growth, Zhou said.