House prices will continue to rise all over China because of a lack
of actual investment in property but a rising purchase potential, the central
bank has predicted.
The People's Bank of China (PBOC) warned that a slowdown in property
investment is likely to widen the gap between housing supply and demand,
therefore prices will rise continuously.
The central bank suggests the government should be extremely concerned about
the trend in the real estate market.
Researchers say part of the reason for the rocketing prices is the
government's effort to control the red-hot economy.
Lin Yueqin, a researcher with the Chinese Academy of Social Sciences, said
that the real estate industry has been the engine driving domestic economic
growth in recent years, as well as a sector which has been earning massive
profits.
"But as loan frequency, fixed asset investment and the industrial economy
have all been slowed down, supply will not meet the demand of the buyers," said
Lin. "Thus prices will go up."
A survey on real estate markets in 35 major cities has prompted the National
Development and Reform Commission to conclude that China's house sale prices in
the second quarter of this year grew by 10.4 per cent year-on-year.
The price level was 2.3 per cent higher than the first quarter this year, and
the land price in the second quarter rose 11.5 per cent year-on-year.
Strong purchasing potential has spurred on prices which have been steadily
increasing for four years.
Fan Dingyu, a restaurant boss in mountainous Tongjiang County, Sichuan
Province, is now considering buying a 100-square-metre apartment in the
provincial capital of Chengdu.
Fan, the mother of a primary school pupil, said the house will cost her about
280,000 yuan (US$33,700) -- equal to the amount an average worker would earn in
30 years.
"My husband and I bought the house for two reasons -- investment and for my
child's education," said Fan, who plans to send her child to school in Chengdu
next year.
Fan is not alone. The Sichuan Provincial Construction Department said about
20 per cent of house buyers in Chengdu are not local residents.
In the second quarter of this year, housing prices in the China's economic
hub of Shanghai increased year-on-year by 21.4 per cent, the fastest growth
among 35 major cities.
Shanghai has taken the national lead, followed by Ningbo, Tianjin, Nanjing
and Chongqing.
Shanghai's increase has already topped those of other cities during the first
quarter of this year, achieving a nearly 30 per cent year-on-year increase.
"Housing prices nationwide have risen quickly," said the National Development
and Reform Commission.
Commercial house prices topped 5,118 yuan (US$617) per square metre last
year, about 24.2 per cent or 1,000 yuan up from the previous year.
Yang Shen, chairman of the China Real Estate Association, said tougher
measures should be put in place to ward off risks in China's bullish real estate
sector despite housing demands in the country remaining
strong.
