Soaring Prices of New Homes Defy Beijing’s Attempts to Cool Market
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Version 0 of 1. HONG KONG — Prices of new homes in China continued to soar in September, defying government efforts to cool the market and highlighting some of the challenges Beijing faces as it seeks to rebalance growth and rein in risks that have built up in the economy during the past five years. Rising affluence, relatively cheap credit and the gradual urbanization of Chinese society, in which millions of people have moved from the countryside to cities, all have contributed to demand for new homes, pushing up prices. Data from the statistics bureau, which tracks changes in China’s 70 biggest cities, showed that prices had risen or remained at their current highs in nearly all of those cities in September. On average, home prices in the places studied rose 9.1 percent from a year earlier. As in previous months, the sharpest gains were in Beijing, Shanghai, Guangzhou and Shenzhen, metropolises whose populations have ballooned as workers from other parts of the country have flocked there in search of jobs. Home prices in Beijing leaped 16 percent in September from a year earlier, picking up from the already large increases of previous months. Prices in Shanghai jumped 17 percent, and new homes in Shenzhen and Guangzhou were one-fifth more expensive. Gains in other cities were less drastic — prices in cities like Urumqi, Wuhan and Nanjing, for example, rose about 10 percent, and those in Haikou, on the southern island of Hainan, edged up 1.1 percent. The government has sought in recent years to rein in property price growth, taking measures like imposing higher down payment requirements. But it has steered clear of more drastic constraints, like property taxes, for fear of depressing a sector that is hugely important to the economy. At least 10 percent of China’s gross domestic product comes directly from the construction and real estate sectors — and far more when the industries that supply them and the consumption linked to the purchases of homes are taken into account, analysts estimate. “The housing market performance has been much stronger than the market had expected at the beginning of the year,” China economists at JPMorgan’s offices in Hong Kong wrote in a research note on Tuesday. While this has been an important engine of economic growth, particularly at a time when overall growth has been flagging, it has also created problems. Investment in real estate has crowded out investment in other industries, the JPMorgan analysts wrote, and the high prices in major cities had become a major source of social dissatisfaction. This and the wide range of price increases within the China have complicated the government’s efforts to cool the market. “In terms of policy, we see no grand tightening in the offing, except that banks are extending fewer mortgages,” said Yao Wei, China economist at Société Générale. Long-term solutions, including property taxes, land reform and sustainable funding sources for affordable housing, she said, will be slow to come. |