Given the "irrational exuberance" in the Shanghai property market in recent weeks, the government must pay more attention to and strengthen the regulation of the real estate sector in Shanghai, the city's Party chief Han Zheng said Sunday as he attended the fourth session of the 12th Chinese People's Political Consultative Conference (CPPCC) National Committee, news site stcn.com said on Sunday. [Special coverage]
The "abnormal" rise in the housing market in first-tier cities could have severe implications for local economies, said Hui Jianqiang, research director with real estate information provider Beijing Zhongfangyanxie Technology Service.
Shanghai, Beijing, and Guangzhou and Shenzhen in South China's Guangdong Province, are the first-tier cities in China.
The surge in prices "will add to the risk of housing bubbles," Hui told the Global Times on Sunday.
"It will also increase costs for high-skilled workers and companies and could potentially drive them out" of such cities," noted Hui.
Hui said regulations and government steps such as increasing land approvals for small and medium-sized housing units are needed to stabilize the market.
But while the government needs to take some steps, including controlling speculative talk in the market, the authorities should proceed with caution because some actions might have unintended consequences, said Yan Yuejin, a research director at Shanghai-based E-house China R&D Institute.
Yan told the Global Times on Sunday that the government should not "blindly" tighten policies governing home purchases because doing so might simply drive more buyers into the market.
The government should try to persuade more people to buy homes in the suburbs of major cities like Shanghai because there is still sufficient housing supply in such locations and a shift in buying patterns could ease pressure on the city centers, Yan said.
Regulations to crack down on "wrongdoings" are also needed, Yan said.
There are also differences in the property markets between first-tier cities and second- and third-tier cities, Chen Zhenggao, head of the Ministry of Housing and Urban-Rural Development, said Saturday when he attended the CPPCC session, domestic news portal finance.sina.com.cn reported Sunday.
Chen said the focus now is on the property markets in first-tier cities in a bid to stabilize those markets.
Considering the overall environment of destocking housing supply in the country, especially in second- and third-tier cities, the housing market in first-tier cities will still rise, said Hui.
Hui also noted that there could be an -improvement in the second half of the year if government policies are implemented.
