Increases due to lack of investment opportunities, land supply: experts
Prices for second-hand homes in Beijing skyrocketed during the Mid-Autumn Festival, caused by an increased number of buyers during the three-day holiday ended on Sunday, higher prices for new homes and illegal practices at real estate agencies.
The soaring property prices in Beijing and other parts of China also highlight the difficulties officials face reining in the overheating market - even with tightened restrictions on homes purchases - because of some remedy measures, such as an easing monetary policy, to revive the slowdown in the economy, experts noted.
Over the Mid-Autumn Festival weekend, a second-hand apartment in Chaoyang district, Beijing, priced at 3.9 million yuan ($584,000) increased by 200,000 yuan in just four days, according to a Beijing resident surnamed Chen. By Sunday, the prices had reached 4.3 million, Chen said.
And despite the skyrocketing home prices, there is no shortage of buyers, as many residents like Chen rushed into the market, according to an agent from Lianjia who only gave her surname as Liu.
"In Beijing, second-hand apartments with prices growing around 200,000 yuan will be sold in no more than two weeks," Liu told the Global Times on Sunday.
While an increase in potential homebuyers in Beijing might have attributed to the dramatic property price surge over the holiday, other longstanding issues, such as a lack of regulations and short land supplies in the housing market also played a role, experts noted.
Loose regulations on the second-hand apartment market have resulted in property owners raising prices at will, according to Yan Yuejin, a research director at the Shanghai-based E-house China R&D Institute.
Illegal operations
In Beijing, illegal transactions, rumors spread by real estate agencies and illegal credit support from these agencies have led to unreasonable growth in second-hand home prices, further deteriorating the property market, Yan noted.
"In order to persuade clients to purchase apartments, agents will tell clients that some prices are rising, even though they didn't grow at all," a Beijing-based real estate agent working for 5i5j Property Agency who is surnamed Jin, told the Global Times Sunday.
"In some agencies, agents pretend to be clients scrambling for second-hand apartments, causing panic in actual clients," Jin said, noting "these clients will then buy the apartment even if the price rises by 100,000 or 200,000 yuan per square meter."
In addition to lack of regulations, an overflow effect from the high prices for new homes also pushed buyers to the second-hand home market, which facilitates transaction volume, resulting in an increase in second-hand apartment prices, according to Yan.
In August, the average home price in Beijing stood at 48,847 yuan per square meter, around 10 times that of Yinchuan, Northwest China's Ningxia Hui Autonomous Region, with a price at 5,025 yuan per square meter, domestic news outlet ce.cn reported last week.
To control rising prices, many Chinese cities, including Beijing and Shanghai, have rolled out measures, such as a higher requirement for down payment or restrictions on the number of homes one can own.
Hangzhou, East China's Zhejiang Province, became the 10th Chinese city to undertake such measures on Sunday, when housing officials in the city announced that sales on new and second-hand homes in urban areas would be temporarily stopped to non-permanent residents with more than one home, starting from Monday.
Limited effect
However, the effectiveness of such regulations has been limited because of side effects from other measures undertaken by the government, according to experts.
For example, a drop in approval of new land supply by local governments has cut into the housing supply and in turn brought up home prices, Fang Xiuling, vice president of the marketing research and exhibition center of Shanghai Huayan Fangmeng Network Technology Co, told the Global Times last week.
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.
Also, a lack of investment opportunities in other areas under the current slowdown in the Chinese economy might have brought more people to invest in the housing market, further fueling the rise in prices, according to Yan.
Loose monetary policy has injected abundant cash into the property market, which has boosted home prices, Yan said, noting that part of the cash is money for speculation, which, if not addressed, could be a larger problem for the economy.
"If home prices slump, financial risks such as mortgage defaults and nonperforming loans at commercial banks will emerge," Yan said.
