It’s a “different kind” of housing bubble in China, and it is popping slowly in most cities, with the exception of Shanghai, mainland China’s most expensive.
Chang Zhi, chief analyst of Century 21 China Real Estate, told the paper that he expects more real estate companies in the second- and third- tier cities to follow in the footsteps of the big realtors and cut real estate prices under the current policy. “A new round of home-price declines may come in one or two months,” Chang said.
China’s government has been faced with rapid appreciation of residential real estate in tier one cities like Shanghai and Beijing. Hong Kong, another entity altogether and rather autonomous from mainland China, has housing prices on par with, or even more expensive than New York City as Hong Kong continues on its path to becoming the Wall Street of Asia.
Sky rocketing housing prices in the main cities on the mainland has exacerbated inflation and increasing income inequality in the country. The government demanded lower prices by developers.
Despite pressure from existing homeowners, market analysts are expecting more price-cuts as declining sales and increasing inventory are putting more strain on property firms.
In September and October, only 10,743 homes were sold in Beijing, down 46 percent from a year ago. New home sales in the first ten months totaled 69,079 units, down 17.8 percent year-on-year, while second-hand home sales dropped 35.8 percent to 101,188 units, according to the paper.
According to the Centaline Property Agency, a supply of 9,152 new homes in October has added Beijing’s total house supply to 118,000 units, a new high since June 2009. It would take 22 months to consume the inventory even if there were no new supply, the agency told the paper.
The China Daily article did not consider recent housing prices.
A September report by China’s National Bureau of Statistics did say, however, that comparing with the previous month, among 70 medium and large-sized cities, the sales prices of newly constructed residential buildings declined in 17 cities but remained stable in 29 cities. Comparing with the August, the sales prices of second-hand residential properties in September dropped in 25 cities, and remained flat in 21 cities, suggesting China still has a battle on it’s hands when it comes to real estate inflation.
According to the Bureau’s price index of new residential real estate prices, Beijing, Shanghai and Guangzhou, some of the most expensive eastern seaboard cities in China, were flat month over month for properties of all sizes, but are up as much as 6% year over year. Real estate prices fell September and August in cities like Nanchang and Xiamen. Housing prices are up by as much as 10% in some cities, excluding the major urban centers, year over year.
The trick for China will be to create the regulations needed to curb real estate price increases while not having to resort to higher interest rates at a time when the economy is slowing.
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