Property sales up 75pc, fuelling bubble fears

Property sales on the mainland soared 75.5 per cent year on year to 4.4 trillion yuan (HK$5 trillion) in 2009, heightening the fears of many that a massive property bubble is building.

'In the eyes of many market participants, the public or even the policymakers, the market to a certain extent has gone over the top. There is a property bubble,' said Xavier Wong, director and head of research for property consultant Knight Frank's Greater China division.

While the figures, issued by the government, show the value of sales skyrocketed, sales as measured by floor area expanded by only 42.1 per cent, according to the National Bureau of Statistics. The significant difference suggests there has been a big increase in property prices. This, in turn, casts doubt on the official announcement last week that home prices rose just 7.8 per cent year on year in December.

'Go ask anyone on the street, and no one will believe that home prices have gone up just 7.8 per cent,' said Lee Hing-yin, director of research and advisory for property agents Colliers International - East China.

Wong said that 'from the difference between the sales value and sales volume, overall property prices rose about 24 per cent last year.'

The jump triggered fresh concern a nationwide property bubble is inflating. Premier Wen Jiabao yesterday repeated his pledge to regulate the property market by tackling speculation and increasing the supply of mass housing and so-called economic housing for the needy.

Underpinned by a sharp rise in mortgage lending and strong pent-up demand, the total value of home sales grew by 80 per cent year on year and that of office space by 66.9 per cent. The biggest growth in sales by value was seen in the wealthy eastern seaboard province of Zhejiang , where prices rose 129.7 per cent, and in Shanghai, where they were up 125.9 per cent, the statistics bureau said on its website yesterday.

The booming market was reflected in record-high sales commissions at Centaline Property Agency's branch in Shenzhen, where general manager Andy Lee said home prices in major districts increased by about 80 per cent last year.

'This is the busiest year I have ever experienced since I was stationed in Shenzhen in 1996,' Lee said. 'The market has gone to the top, especially in November. None of our 300 property agents was allowed to take a day off that month.'

Commission on sales of homes in the secondary market at Centaline's Shenzhen branch were 100 million yuan in November, compared with a monthly average of between 60 million and 70 million yuan, Lee said.

'Obviously the government figure on home price growth is understated,' he said.

Average home prices in Shanghai's urban areas rose more than 60 per cent, to about 20,000 yuan per square metre in December, from 12,000 yuan in January last year, said Lee Hing-yin of Colliers.

Looking ahead, Andy Lee at Centaline said home prices and sales volumes would drop in the first three months of this year as a result of the central government's austerity measures. To counter property speculation, Beijing has tightened lending standards for mainland banks from this week, requiring them to set aside a higher proportion of deposits as reserves.

The market reacted swiftly, with sales volumes falling 6 per cent in Beijing and 38 per cent in Shenzhen in the past two weeks compared with the two weeks prior to that.

But Wong of Knight Frank and Lee Hing-yin of Colliers did not expect a dramatic decline in home prices.

'It is unlikely that the growing bubble will burst given the strong demand for property, the fast pace of urbanisation and developers' low inventory of unsold properties,' Wong said.

Hot markets

Zhejiang and Shanghai saw the biggest growth in sales last year

In Shenzhen, one property agent said home sales in some districts rose by: 80%

Blowing bubbles

The surge in mainland property sales to a total of 4.4 trillion yuan last year reaffirms developers? warnings of a bubble and comes despite Beijing?s attempts to tame soaring prices

Average home prices in urban areas (yuan/sq metre)

Guangzhou Jan 2007: 9,616 Dec 2010*: 18,832

Shenzhen Jan 2007: 10,805 Dec 2010*: 23,094

Shanghai Jan 2007: 12,629 Dec 2010*: 23,791

Beijing Jan 2007: 11,330 Dec 2010*: 23,429

* forecast

SOURCES: NATIONAL BUREAU OF STATISTICS, FRANK KNIGHT, HOLDWAYS