China not headed for Japan-style property bust, says minister
Chen Zhenggao talks down the possibility of a sudden real estate slump amid a rebound in prices in country’s top-tier cities
China’s housing bubbles are controllable and the country’s property market is not on track for a Japan-style boom and bust.
That was the view of Minister of Housing and Urban-Rural Development Chen Zhenggao, who mounted a strong defence of the country’s frothy real estate market on Tuesday.
He said action by the authorities and the national urbanisation drive could be instrumental in helping China avoid a sudden collapse in housing prices that battered Japan decades ago.
“It’s a different era now,” Chen said on the sidelines of the annual session of the National People’s Congress in Beijing.
“The two markets [of China and Japan] cannot be compared because they are at different stages of economic development, have different levels of urbanisation, and have different macroeconomic policies.”
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Japan’s stock market plummeted in 1990 after a period of inflated real estate and stock prices, resulting in a prolonged slump in the island nation’s economy.
Concerns of similar overheating have surfaced on the mainland as property prices have sharply rebounded in big cities such as Beijing and Shanghai. According to official data, new home prices in Shanghai surged 21.4 per cent in January from a year earlier while second-hand units were up 14.4 per cent.
The price of an average flat in the mainland’s commercial hub could jump hundreds of thousands of yuan overnight as interested buyers up their offers, according to mainland media.
Chen said the government’s priority now was to stabilise the markets in top and second-tier cities.
Credit-tightening measures such as housing purchase restrictions and taxes would be applied to cool activity.
READ MORE: Why China’s policymakers are caught in a property double bind
James Macdonald, director of China research at Savills, said the strong figures could be partly explained by the low base of comparison last year. “But they do generally represent a slightly more upbeat market as some of government’s supportive policies start to gain traction in the real estate market,” he said.
Chen said property markets had fared differently across the country, with prices staying low in smaller third- and fourth-tier cities.
Developers and local governments are also desperate to cut inventory of homes built in lower-tier cities.
By the end of last year, the mainland had 718 million square metres of unsold housing and the total had risen to 739 million square metres at the end of February, Chen said.
In those smaller cities where the property market remains sluggish, the government has been rolling out various measures to cut back on stockpiles.
The measures include reducing requirements for down payments.
The property industry has been one of the key drivers for the mainland’s economy over the past two decades.
Beijing has stepped in at various times to take some of the heat out of prices when they have risen sharply but the efforts have rarely been effective for long.
