New home prices are rising throughout the country, but at a slower pace than last year due to China's tightening policies aimed at reining in property speculation, the Chinese Academy of Social Sciences said in its annual economic report released yesterday.

However, the report said that despite the slowdown, about 85 percent of urban Chinese households still couldn't afford new homes because prices were too high, with any increase in wages lagging behind the increase in the cost of a home.

By the end of this month, the average price of new houses in China this year is expected to have increased by 15 percent, compared to 2009's annual growth of 25 percent, the academy said.

It was basing its forecast on statistics gathered in the first eight months of 2010.

Between January and August, new properties around the country, excluding those built for relocated residents under urban redevelopment plans, sold for an average 5,520 yuan (US$830) per square meter, compared with 4,800 yuan per square meter in the same period of last year, the report said.

"The central government should maintain its tough stance to curb property speculation over the coming year to help raise buyers' affordability," said Sky Xue, an analyst with the China Real Estate Information Corporation, a real estate information, consulting and online services provider. "Otherwise, it could be possible that home prices would notably rebound again."

The academy's report predicted that there could be a price surge of between 20 and 25 percent if existing measures to rein in speculative investment were loosened.

It also pointed out that an adequate supply of land, which should be released in line with China's urbanization progress, may offer a solution to the country's housing issue and said the government should pay more attention to maintaining a balance between the growth of house prices and people's incomes.

In addition to tightened mortgage terms, some other measures such as a property tax should also be considered to help dampen speculation in the real estate market. It was also necessary to find ways to reduce local governments' dependence on income from land sales, which has long been identified as the major reason behind high home prices, the report said.

Real estate prices in 70 major Chinese cities climbed 8.6 percent from a year earlier in October, extending a rally to 17 consecutive months, the National Bureau of Statistics said last month.

In Shanghai, new houses were sold for an average 22,468 yuan per square meter in November, an increase of 2.5 percent from October, extending gains for five straight months, according to Shanghai Uwin Real Estate Information Services Co.

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