Controls have little effect on surging property prices
Property prices in key mainland markets have started rising strongly since the beginning of the year, suggesting central government moves to curb speculation are not working, media reports and analysts said yesterday.
The mainland's economy grew 10.2 per cent in the first quarter of this year, leading President Hu Jintao to caution against 'excessively rapid' economic growth. The rapid growth had been matched by rises in property prices in cities like Shanghai, Beijing, Guangzhou and Shenzhen, the China Business Times reported yesterday.
In Shanghai, buyers of one residential project overlooking Suzhou Creek were literally lining up to sign contracts at the weekend. Many were overseas Chinese and foreign investors not put off by paying nearly 4 million yuan for a 180 square metre flat. 'Shanghai's property prices won't go down,' said a middle-aged Shanghainese woman, who had come to browse but not buy.
Analysts attribute the strength in Shanghai's property market, perhaps the most speculative on the mainland, to a variety of factors: the 2010 World Expo, massive redevelopment projects and inflows of overseas capital.
At the same time, many connected with property are also talking up the market, saying the central government is unlikely to take measures to slow growth this year despite lip service criticising speculation.
'There are unlikely to be tougher measures - such as taxes - to come this year. The loosening of mortgage policies at local banks and a possible increase in the limit on borrowing from the public housing fund are all good news for the market,' said Sun Jianping , an analyst at Guotai Junan Securities.
'The Shanghai market will probably finish its correction in the first half and grow at a stable pace for the rest of the year.'
Official figures showed turnover in Shanghai's residential market reached 1.8 million square metres in March, up from 820,000 square metres in February. The average price was 9,548 yuan per square metre last month.
Shanghai targeted property speculators last March by introducing a capital gains tax of 5.5 per cent on properties sold within one year of purchase.
The central government followed up mid-year with several national measures, including a sales tax on homes sold within two years of purchase, tighter bank lending and penalties for developers holding idle land.
But Beijing's residential prices are also rising, leading one commentator to describe the market as brisk. Some analysts forecast Beijing residential prices will rise at least 20 per cent this year, while the secondary market will grow a slower 12 to 15 per cent.
Analysts say factors like relocation to make way for projects associated with the Beijing Olympics in 2008 are supporting the rise. But developers are also holding back flats to limit supply in hopes of reaping bigger rewards later.
In the southern cities of Guangzhou and Shenzhen, prices were also rising, mainly because of land shortages, analysts said. In Guangzhou, the average residential price was 7,483 yuan per square metre for housing in the inner city in the first three months of this year, up 14 per cent from December. Fewer new projects, lack of land and developers holding back units or selling them internally had driven up prices in Guangzhou.
Additional reporting by He Huifeng
