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Home » Opinion » Chinese Views
Runaway housing prices prompt dark prophesies
Source: Xinhua |
April 7, 2010, Wednesday
|
Print Edition
Print Edition
PREDICTIONS have flooded the Internet in China this week about the country's runaway property market collapsing in 2011.
Much of the chatter voiced little concern about the possible severe consequences, it instead expressed hope for the crash to come.
Speculation started after a comparison was made between China and Japan.
In 1991, Japan's property bubble burst. Following the Japanese yen's appreciation in 1985, large amounts of capital flowed into the country's real estate, inflating prices artificially, which led to a burst.
Two decades later, some say the same is happening in China, both in sequence and pace: the yuan appreciated in 2005, capital flowed to property markets in 2006, resulting in soaring housing prices in 2007, and now the burst is imminent.
Feng Zhichao, a 30-something man, has been living in Beijing for 12 years, since starting college. He is working for a foreign company with a salary of 5,000 yuan (US$732) per month and pays 750 yuan per month for rent for a room less than 10 square meters.
"House prices in Beijing are crazy! I wish the property market would collapse this year! Then I could buy an apartment of my own in the city and be in the position to think about marriage," he said. "If I were wealthy enough, I would not care about home prices," he added.
Homes in Beijing stood at 14,000 yuan per square meter in the first quarter of this year, much higher than about 9,300 yuan in the same period of last year, according to the local statistics bureau.
Dong Wei, a 27 year-old Beijinger and an employee of a foreign IT company, said: "I don't believe the property market will crash. The government will not let that happen. Despite and because of the fast price growth, I will buy soon if I can find a proper one."
Fall or rise?
For people who are struggling to buy an apartment in cities, a big market correction will make their dream come true. However, for those who have bought apartments at high prices in recent years and for those who invest for profit, a crash would destroy their dream.
Wang Xu works in Shanghai, which has seen skyrocketing housing prices in the past few years. She owns two apartments, so the last thing she wants is a property market burst.
The 28 year-old woman spent about 800,000 yuan on a second home of 60 square meters in Shanghai last March, after she and her husband bought their 30-square-meter first home in 2005 with 290,000 yuan. The first now is worth more than 600,000 yuan and the second home is now worth more than 1.2 million yuan. "If the property market crashes, I will definitely crash at the same time. The money I have invested in the houses would disappear."
"The anticipation of a market collapse shows that people are getting more discontent and impatient as property prices go through the roof and government measures failed to control the prices rise," said Qin Rui, a senior analyst with the Beijing-based 5i5j Real Estate Service.
February home prices in 70 major cities in China climbed 10.7 percent from a year earlier, the fastest pace in almost two years, the National Bureau of Statistics reported. The rapid growth has ignited fears of an asset price bubble.
Since the end of last year, the government has put in place a series of measures to curb speculative purchasing to stabilize prices, including a harsher property sales tax, increased supply of affordable houses, restraining land purchases, and controlling bank credit.
Qin said the policies and seasonal factors in the first two months helped stabilize sales and prices for a while at the beginning of this year. However, people had still expected more effective measures to be unveiled from the annual session of the National People's Congress, China's parliament, in March, he said.
Since the parliamentary session, however, sales and prices have resumed the fast rate of growth in major cities.
Some experts say China is unlikely to repeat Japan's asset bubble crash because China is at a different stage than Japan was in the 1980s.
The Bank of Japan said in a report last week that China's current asset price gains were mainly driven by increasing real demand, with more of its population moving to urban areas. This was different from Japan's asset price bubble in the late 1980s, which was driven by speculation.
Cheng Enfu, a senior scholar at the Chinese Academy of Social Sciences, said another difference was that policies made by the Chinese government tended to be more timely and forceful than Japan's policies because policy making in Japan was more affected by different interest groups.
But Cheng warned: "The bubble is big now." He said the government must be highly alert to potential risks as it would hurt the country's economy and result in social instability if left uncontrolled.
Much of the chatter voiced little concern about the possible severe consequences, it instead expressed hope for the crash to come.
Speculation started after a comparison was made between China and Japan.
In 1991, Japan's property bubble burst. Following the Japanese yen's appreciation in 1985, large amounts of capital flowed into the country's real estate, inflating prices artificially, which led to a burst.
Two decades later, some say the same is happening in China, both in sequence and pace: the yuan appreciated in 2005, capital flowed to property markets in 2006, resulting in soaring housing prices in 2007, and now the burst is imminent.
Feng Zhichao, a 30-something man, has been living in Beijing for 12 years, since starting college. He is working for a foreign company with a salary of 5,000 yuan (US$732) per month and pays 750 yuan per month for rent for a room less than 10 square meters.
"House prices in Beijing are crazy! I wish the property market would collapse this year! Then I could buy an apartment of my own in the city and be in the position to think about marriage," he said. "If I were wealthy enough, I would not care about home prices," he added.
Homes in Beijing stood at 14,000 yuan per square meter in the first quarter of this year, much higher than about 9,300 yuan in the same period of last year, according to the local statistics bureau.
Dong Wei, a 27 year-old Beijinger and an employee of a foreign IT company, said: "I don't believe the property market will crash. The government will not let that happen. Despite and because of the fast price growth, I will buy soon if I can find a proper one."
Fall or rise?
For people who are struggling to buy an apartment in cities, a big market correction will make their dream come true. However, for those who have bought apartments at high prices in recent years and for those who invest for profit, a crash would destroy their dream.
Wang Xu works in Shanghai, which has seen skyrocketing housing prices in the past few years. She owns two apartments, so the last thing she wants is a property market burst.
The 28 year-old woman spent about 800,000 yuan on a second home of 60 square meters in Shanghai last March, after she and her husband bought their 30-square-meter first home in 2005 with 290,000 yuan. The first now is worth more than 600,000 yuan and the second home is now worth more than 1.2 million yuan. "If the property market crashes, I will definitely crash at the same time. The money I have invested in the houses would disappear."
"The anticipation of a market collapse shows that people are getting more discontent and impatient as property prices go through the roof and government measures failed to control the prices rise," said Qin Rui, a senior analyst with the Beijing-based 5i5j Real Estate Service.
February home prices in 70 major cities in China climbed 10.7 percent from a year earlier, the fastest pace in almost two years, the National Bureau of Statistics reported. The rapid growth has ignited fears of an asset price bubble.
Since the end of last year, the government has put in place a series of measures to curb speculative purchasing to stabilize prices, including a harsher property sales tax, increased supply of affordable houses, restraining land purchases, and controlling bank credit.
Qin said the policies and seasonal factors in the first two months helped stabilize sales and prices for a while at the beginning of this year. However, people had still expected more effective measures to be unveiled from the annual session of the National People's Congress, China's parliament, in March, he said.
Since the parliamentary session, however, sales and prices have resumed the fast rate of growth in major cities.
Some experts say China is unlikely to repeat Japan's asset bubble crash because China is at a different stage than Japan was in the 1980s.
The Bank of Japan said in a report last week that China's current asset price gains were mainly driven by increasing real demand, with more of its population moving to urban areas. This was different from Japan's asset price bubble in the late 1980s, which was driven by speculation.
Cheng Enfu, a senior scholar at the Chinese Academy of Social Sciences, said another difference was that policies made by the Chinese government tended to be more timely and forceful than Japan's policies because policy making in Japan was more affected by different interest groups.
But Cheng warned: "The bubble is big now." He said the government must be highly alert to potential risks as it would hurt the country's economy and result in social instability if left uncontrolled.
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