China home prices face upward pressure

With developers failing to replenish their land banks as sales rise, the dwindling housing supply is expected to drive property values higher

PUBLISHED : Tuesday, 16 July, 2013, 12:00am
UPDATED : Tuesday, 16 July, 2013, 5:16am

A mainland government-funded think tank believes property prices are facing upward pressure as developers have not replenished their land banks in the past two years to start new construction work.

Alan Chiang Sheung-lai, the head of residential property at DTZ Greater China, said some cities such as Beijing were facing a shortage of housing supply that would lead to property price rises.

However, Chiang added that as competition between developers remained strong, they would not raise their prices aggressively. "We won't see a sharp growth in property prices," he said.

He expects price growth will be limited to single digits. A real estate report by the Chinese Academy of Social Sciences yesterday said developers had been reluctant to acquire development sites because of weak market sentiment.

For example, in Beijing, the residential floor area under construction fell 37.3 per cent last year. However, sales rose more than 30 per cent.

The authority believes this would lead to a shortage of housing supply in some cities and a growth in property prices as a result.

The academy said property price growth across the country remained under control last year. The average price of private housing rose 8.1 per cent to 5,791 yuan (HK$7,320) per square metre.

The average price of private housing in major 16 provinces remained steady, with growth of less than 10 per cent.

However, data from National Bureau of Statistics shows prices in the second-hand market surged 12.8 per cent in May from a year earlier.

As the sentiment improved, investment in the property market increased.

According to the statistics bureau, investment in real estate across the country rose 20.3 per cent from a year earlier to 3.68 trillion yuan. The growth was less than the 20.6 per cent for the first five months of this year. Investment in residential property grew 20.8 per cent to 2.52 trillion yuan in the same period.

Chiang said: "The government hopes to curb strong property prices by introducing cooling measures.

"However, housing demand from end users remains strong and the sales of small flats are active. This will cause upward pressure on prices.

"The only concern is the impact of the mainland's economic growth slowing in future."