Property prices are booming globally, and one thing is driving the increase

Whenever President Xi Jinping repeats his mantra that houses are for living in, not for speculation, it is a sign that home values are rising too sharply and Beijing is looking at ways of taking the heat out of the market.

Since Xi renewed his call for stability in the residential market earlier this year, China’s property boom has shown few signs of abating. In April, new home values in 70 major cities grew at their fastest pace in eight months, with investors using real estate as a hedge against the surge in inflation.

With previous curbs having failed to dampen speculation, Beijing has revived a plan to introduce a national tax on home ownership. This could be tested in cities where prices have risen the fastest, such as Shenzhen and Guangzhou.

China is not the only country in the Asia-Pacific region where governments, acutely aware of public unease over expensive housing, are under pressure to rein in runaway prices. In New Zealand, where house prices soared 22 per cent in the year to the end of March, the government has instructed the central bank to pay more attention to the property market when setting policy and has reduced the financial incentives to invest in housing.

Singapore’s government is considering intervening again after prices in the first quarter rose at their fastest rate since 2018. In South Korea, where prices in Seoul have spiked in the past five years, public discontent over a long-lasting property bubble has reached fever pitch, despite more than 20 rounds of measures aimed at cooling the market.

Yet, while there are many examples of rapid rises in home values in Asia, it is North America and Europe that have dominated the rankings in house price indices since the eruption of the Covid-19 pandemic, both in mainstream and luxury markets.