China city offers housing subsidies to boost sales

An eastern Chinese city on Friday announced subsidies for apartment purchases in an effort to counter falling sales, despite central government measures to curb real estate speculation.

The government of Wuhu, a city of 1.5 million people, said the measures were aimed at boosting sales after local media said property prices in the city fell 5.7 percent over the last eight months.

The move appears to be one of the first efforts to boost housing sales in China after the central government took steps last year to curb property speculation, including higher down payments, bans on second home purchases, and new property taxes.

According to a notice on the Wuhu city website, house prices would be subsidised by 150 yuan ($23) per square metre on ordinary homes smaller than 70 square metres (753 square feet).

Average home prices in Wuhu are about 5,500 yuan per square metre.

The central government announced last month that 52 of 70 Chinese cities recorded month-on-month falls in new home prices, up slightly from 49 in November, a sign that efforts to curb speculation were working.

The government hiked interest rates and restricted bank lending to rein in surging inflation and cool real estate prices, reducing the credit available to buyers and hitting property developers hard.

The measures were imposed after property prices soared beyond the reach of many ordinary Chinese.