BEIJING • Prices of new homes in China rose last year at the fastest rate since 2011, but moderated enough in December to calm fears of a speculative bubble bursting, with disastrous economic effect.

The price moderation will come as a relief to the country's leaders as they wrestle with economic targets for 2017.

It is believed Beijing is prepared to accept a more modest growth target of 6.5 per cent this year as it tackles a mountain of debt built up over years of heavy official borrowing to fund stimulus campaigns.

China depended heavily on the surging real estate market and government stimulus to drive economic expansion last year. It is widely expected to report tomorrow that it met its annual GDP growth target of 6.5 to 7 per cent.

Analysts say two forward-looking figures - household loans and house sales - have been indicative of the cooling trend in the property market. "There's usually a two- to three-month lag between housing transactions and prices. And housing sales really began to fall quite precipitously in November," said Mr Jonas Short, head of investment bank NSBO's Beijing office.

Average new home prices in 70 major cities rose 12.4 per cent last December from a year earlier, compared to November's record 12.6 per cent rise, data from the National Bureau of Statistics (NBS) shows.

National monthly growth cooled to 0.3 per cent versus 0.6 per cent in November, the NBS said.

Twelve of 15 markets that had been singled out by the authorities as overheating had price falls, a significant increase from November. "Slow growth or slight price declines are exactly what the government wants," said Mr Short.

China's leaders have pledged to strictly limit credit flowing into speculative buying in the housing market in 2017.

REUTERS