Despite a series of state policies and regulations implemented
to control the overheated property sector, housing prices keep
soaring in China. Xiaokang magazine provides a detailed
analysis of the price hike in ten cities, hoping it shed light on
this phenomenon.
Beijing: land in short supply
"The long procedure of land marketing results in the short
supply of available land in Beijing," said Liu Weixin, a researcher
with the Chinese Academy of Sciences. "And we must keep in mind
that land is a limited resource that cannot be supplied
infinitely."
Furthermore, as the national political and cultural center, a
great number of people flood into Beijing annually and fuel the
housing market. Many graduates also choose to work and settle down
here. "Huge demand and short supply has caused a price hike here,"
Liu observed.
He also disputes the opinion that the 2008 Beijing Olympic Games
will be a turning point in the price hike, saying that after 2008,
Beijing will still be the capital and the influx of population will
not change. The land in need will still be in short supply and thus
the price will not fall.
Shenzhen: convenient travel to HK
The housing price in Shenzhen, the first special economic zone
in China, has seen continual growth since the end of 2005. The
average price of housing in the downtown area is 15,000-20,000 yuan
(US$1,980-2,630) per square meter while that of luxury housing is
35,000-45,000 yuan (US$4,610-5,920) per square meter.
On the other hand, the average price in neighboring Hong Kong is
20,000-30,000 yuan (US$ 2,630-3,950), almost double than that in
Shenzhen. Additionally, Hong Kong residents' GDP per capita was
US$38,127 in 2006 while that in Shenzhen was only US$8,619.
"Many Hong Kong residents buy houses in Shenzhen for the
convenient transportation and comparatively low price," said
Professor Ye Jianping, dean of the Land Management Department of
Renmin University of China.
With the impending opening of the highway connecting Shenzhen's
Nanshan district and Hong Kong, housing prices in this area
increased to 22,000 yuan (US$2,897) per square meter in just one
week, according to industrial insiders.
Tianjin: close ties with Beijing
A similar pattern can be seen in Tianjin. Expressways and bullet
trains between Beijing and Tianjin have enhanced their connections;
for example, it now takes only 65 minutes by car to travel from
Tianjin to Wangfujing, a downtown commercial street in Beijing.
Many people working in Beijing are considering buying houses in
Tianjin.
Statistics show that in first half of this year, the average
housing price in Tianjin was 5,819 yuan (US$766) per square meter,
up over 16 percent from the previous year. The business volume of
commercial housing was 3.62 million square meters, 16.6 percent up.
In the first quarter, investment in the property sector increased
22.3 percent and the developing index of real estate was 14.85 up
from the same period last year.
As an industrial city in northern China, Tianjin also has its
own dynamic economy. The transportation advantage will bring more
capital and population there as well as great opportunity in real
estate.
Guangzhou: dynamic capital city
The once stable real estate market in Guangzhou, capital city of
South China's Guangdong Province, has witnessed a price hike since
this June. The average price in six downtown districts increased
almost 1,000 yuan (US$131.7) per square meter in just one
month.
"With an expectation of long-term development for the Chinese
economy, the property sector has become a hot spot for investment
and the prices in Guangzhou will naturally increase," said
Professor Ye. "The provincial government should guarantee ordinary
people's interests by strengthening construction of
economically-affordable housing and promoting projects on low-rent
housing," he advised.
Beihai: beauty at a cost
The price increase of new commercial housing in Beihai, a
coastal city in south China's Guangxi Zhuang Autonomous Region, has
topped the national list for three consecutive months, according to
figures released by the National Development and Reform
Commission.
Mayor Lian Younong views the soar as the result of the recovery
of the real estate market. Housing prices in Beihai slumped from
10,000 yuan (US$1,317) to 400 yuan (US$52.7) per square meter after
the property bubble popped in 1993. Most of the commercial housing
sold before 2006 was formerly incompleted projects with price
averaging at 1,200 yuan (US$158) per square meter. All projects
sold this year are newly constructed with a cost of about 1,500
yuan (US$197.6) per square meter and average price about 2,300 yuan
(US$303) per square meter.
He foresees more room for rising costs: "As a famous tourism
destination and one of the ten most livable cities in China, prices
here will continue growing with economic development and maybe keep
the top position."
According to Wu Haiyan, deputy director of Beihai Real Estate
Trading Center, the percentage of houses purchased by non-natives
is increasing with 35 percent in 2005, 43 percent in 2006, and 52
percent in the first quarter of this year.
Shanghai: World Expo
The real estate market in Shanghai got a new momentum after the
city's successful bid to hold the 2010 World Expo.
According to research conducted by Fortune magazine, 92
percent of more than 40,000 multinational corporations consider
establishing regional headquarters in China and 45 percent among
them choose Shanghai as the first choice.
By holding the World Expo, Shanghai's image as a cosmopolis and
a financial hub in China will be reinforced and its housing prices
will keep growing steadily with the increase of its value.
Hangzhou: house or investment tool?
Housing prices in Hangzhou, a city famous for its West Lake in
east China's Zhejiang Province, reached 10,000 yuan (US$1,317) per
square meter this year. However, the rate between price and
disposable income in Hangzhou has reached 10:1, much over the
international standard of 3:1-6:1.
Who buy these expensive houses? And for what purpose?
According to Wang Zhigang, an industrial insider, the real
estate market in Hangzhou is stirred up by the outside wealthy.
Named as a heaven on earth, its livable environment and tourism
resources attract many investors from home and abroad, especially
those from affluent neighboring areas within the province. They buy
houses here both for living and investment.
Nanjing: rigid demand increase
Nanjing, capital city of Jiangsu Province, has set records in
housing prices when a new project's price jumped by 1,200 yuan
(US$158) per square meter in two hours.
Great demand has caused the price hike, observed by Gu Yin,
director of the Nanjing Branch of National Real Estate Indices. In
previous years, many people were wait-and-see on purchasing houses.
However, after entering 2007, rigid demand for marriage and
relocation has increased while supply has not.
"With a national growth of house prices, tight control of lands
and loans, as well as growing demand, the cost of housing in
Nanjing will keep rising," he analyzed.
Chongqing: municipality effect
As the youngest municipality, Chongqing just celebrated its
tenth birthday. Residents here were once called the happiest house
buyers for the cheap price. In 2006, the average price was 2,700
yuan (US$ 356) per square meter, equaling to the average monthly
income.
But from June 17 to 25 this year, merely in nine days, the
average price soared from 2,800 yuan (US$369) to 3,055 yuan
(US$403), a 7.6 percent increase.
"The tenth anniversary is a turning point of Chongqing's house
price growth," said He Zhiya, vice chairman of Planning Council in
Chongqing. "Economic growth and social stability enhance people's
confidence for future development. And prices here are pretty low
compared with Beijing and Shanghai. So it is normal for a price
hike in Chongqing," He added.
Chengdu: investing in a central area
Projects in downtown Chengdu, capital city of southwest China's
Sichuan Province, sold well recently due to a popular concept of
investing in a central area.
The prices downtown increased from 3,000 yuan (US$395) in 2002
to 10,000 yuan (US$1,317) in 2007. As a new special zone, Chengdu
has huge potential in economic development and rich historic and
cultural heritage. These make it a new hot spot for investment and
naturally there is a hike in housing prices.?
With the operation of two metro lines, more price soars are
expected in Chengdu's downtown areas.
Expertise:
"To solve the contradiction between price and purchasing power,
polices should focus on deeper problems, like the distribution and
supply systems," said Zhao Xiao, a professor with the School of
Economic Management at the University of Science and Technology in
Beijing.
The broadening income and distribution gaps have affected the
property sector. Going to market alone could not solve the
low-income bracket's demand for housing. It also needs social
security systems. Although the government has spent a lot on
constructing housing security systems since 2006, there is still a
long way to go.
"When judging a trend in the real estate market, developers
should not be misled by large amount of capital and only pursue the
high profit made by luxury residencies. They should watch out for
the risks of capital driven by short profit," advised Zuo Xiaolei,
chief economist for China Galaxy Securities.
"The property sector will play a large role in development in
the long term. However, the policy makers should pay more attention
to the construction of middle and low-end housing to meet the
effective demand which could not be fully represented by a huge
money flow."
(China.org.cn by Li Shen, September 1, 2007)
