NewRisks of property bubble growing in China with policy options running out
Some economists compare the frenzy to Japan in the late 1980s and the US before the crash in 2008
Risks of a property bubble are growing in mainland China’s major cities, observers say.
New home prices have risen more than 30 per cent year on year among first-tier and a few second-tier cities. In August, Xiamen, a coastal city on the mainland side of the Taiwan Strait, saw prices rise 44 per cent. Similar increases were also seen in Hefei, Nanjing, Shenzhen, Shanghai, Beijing and Tianjin.
It’s abnormal especially when the economy is facing downward pressure and corporate profitability is weak
In some cities, the prices are approaching levels seen in New York, London and Hong Kong. A three-room flat measuring 266 sq metres at a development called Purple Palace in Beijing goes for 31.9 million yuan, which will take 375 years for a Beijinger with an average annual salary of 85,038 yuan to pay off.
Signs of panic buying are already emerging. A China Vanke project in suburban Beijing sold out overnight.
In Shenzhen, where August home prices jumped 37 per cent year on year, some units as small as 6 sq metres were offered for sale. Nine of them, at a price of 880,000 yuan each, all sold out within the day, the Guangzhou Daily said.
On Sunday, Nanjing city government announced further homebuying restrictions. Effective from Monday, non-Nanjing resident households who already own one or more new properties will also be prohibited from buying any new flats or any units in the secondary market.