(Graphics/GT)
Prices unsustainable, will return to normal soon
Driven by increasing demand for home ownership and large amounts of cash entering the market for speculation, the domestic property sector continues to boom.
Experts said the situation is unsustainable and the market is very likely to return to normal in the long run.
"Secondhand homes are in short supply in Beijing. If homes for sale are of good quality and their prices are not much higher than market prices [for new homes], they will be quickly sold," a senior counselor at real estate agency Lianjia in Beijing, who only gave his surname Liu, told the Global Times on Monday.
In August, a 58-square-meter apartment located in Chaoyang district in the east of Beijing was sold within 24 hours, he said.
A salesman at Shanghai Yanze Real Estate Co, who also only gave his surname Liu, said homes are easy to sell in Shanghai. The salesman told the Global Times on Monday that many consumers come to ask about prices every day.
From September 5 to Sunday, the number of homes sold in Beijing soared 106.82 percent week-on-week to 1,456, according to data from the China Index Academy (CIA).
Meanwhile, secondhand home prices continue to rise in major cities. Since the beginning of August, the average secondhand home price in Chaoyang district has risen about 2,500 yuan ($374.25) to almost 57,000 yuan per square meter, Liu from Lianjia said.
"We still have homes for sale but the prices are too much high," noted Liu of Shanghai Yanze Real Estate. Secondhand home prices in Jing'an district in Shanghai rose about 10 percent in the past two months to around 80,000 yuan per square meter, he said.
According to the CIA, the average price of a new home in 100 major domestic cities was 12,270 yuan per square meter in August, up 2.17 percent month-on-month.
"Large amounts of cash flowing into the property market boost home prices. Part of the cash is money for speculation," Yan Yuejin, a research director at the Shanghai-based E-house China R&D Institute, told the Global Times on Monday.
Loose monetary policy injects abundant cash into the market. Combined with high leverage, this results in increasingly high home prices, Yan explained.
High home prices in first-tier cities can also be attributed to short land supplies and rising house ownership, Fang Xiuling, vice president of the marketing research and exhibition center of Shanghai Huayan Fangmeng Network Technology Co, told the Global Times on Monday.
Land supply is declining in Beijing, and there has been no new land supply since May, domestic news portal stcn.com reported on August 23.
If home prices rise too fast, that can lead to a widening wealth gap, while if home prices slump, financial risks such as mortgage defaults and nonperforming loans at commercial banks will emerge, Yan said.
Fang said most white-collar workers in first-tier cities can't afford a home now.
However, experts said the booming property market is unsustainable and conditions will return to normal in the long run.
"The market has a self-regulation capability. It is expected that transaction volumes will drop after a period of high home prices," Yan said.
The authorities are tightening credit for developers while increasing that for individuals to reduce housing inventories, stcn.com reported on Monday. In the first six months of 2016, 18 domestic banks' new credit for developers was 38.54 billion yuan, dropping 83.54 percent year-on-year.
Some hot cities including Wuhan in Central China's Hubei Province and Nanjing and Suzhou in East China's Jiangsu Province have lifted the down payments for second homes as well as other measures to keep home prices from rising further, the Xinhua News Agency reported in September.
