Capital property prices may fall after Olympics

PUBLISHED : Saturday, 30 June, 2007, 12:00am
UPDATED : Saturday, 30 June, 2007, 12:00am

Beijing home prices are likely to fall after the 2008 Olympic Games as the market has been over-expanding, the government-controlled Beijing Olympics Economic Research Institute has warned.

In what is believed to be the first municipal government outlook on the local property market after the Olympic Games, the institute pointed out that a bubble was forming.

'The property market has been overly optimistic in [assessing] the positive impact of the Olympic Games,' according to the 85-page report.

By the institute's estimate of an average growth of 200,000 families per year between 2005 and 2010, annual demand for new flats in Beijing worked out to 20 million square metres, way below the built-up areas.

It noted 'serious oversupply' with recently completed homes surpassing population growth.

However, Beijing's surging residential prices have shown no sign of easing.

Prices for new homes in Beijing jumped 9.6 per cent last month.

'Home prices have gone beyond public affordability,' it said.

The institute blamed soaring home prices on the government, which apparently wishes to generate more revenue from land auctions.

It also criticised developers for holding back sales of completed units to control supply, thus encouraging speculation.

The institute expressed belief that the introduction of a property tax and rising interest rates would put pressure on home prices after the games.

'The increase in supply of affordable homes will also ease the escalating property prices,' it said.

Mainland home prices, particularly in key cities such as Beijing, Shanghai and Shenzhen, have been rising despite government measures such as credit tightening and taxes.

With a view towards curbing speculation, the Shanghai government earlier this month launched an investigation into some prominent residential projects, notably the Tomson Riviera luxury development.

Last week, China Vanke was the first key developer to warn of a bubble bursting in two years in the mainland home market.