Surging property prices are again raising concerns about a property bubble in China.
Chinese home prices climbed in 65 of 70 cities monitored by the National Bureau of Statistics in September. Prices are close to record highs.
On a monthly basis home prices were up 0.67%, which was slower than 0.79% in August. And housing inflation was much stronger in first tier cities, namely, Beijing, Shanghai, Guangdong and Shenzhen, than in lower tier cities.
Bloomberg chief economist Michael McDonough tweeted a chart of year-over-year gains in Chinese home prices, saying, “As I board my flight to Shanghai: A Very Simple Chart Likely Worrying China’s Policy Makers.”
Sales volume growth in China slowed to 21.2% year-over-year in Q3, from 32.4% the previous quarter, and housing investment is slowing too. Housing starts are expected to slow in coming months.
“The under-supply situation in big cities is unlikely to change in the near term,” writes Societe Generale’s Wei Yao.
To help address rising property prices Beijing unveiled seven new regulations or Beijing Seven Rules, according to Caixin Online. These rules are centered on making homes more affordable and on homes that will likely be bought by the lower and middle income group. From Caixin Online:
“There are four types of restrictions. The first regards price. Self-use commercial housing must be 30 per cent cheaper than normal commercial housing in the same area. Regarding size, the flats concerned will be 90 square meters or less. Third, owners are not allowed to sell the property within five years of purchase. If they do, they must return 30 per cent of the profit. Finally, only people with Beijing Hukou, or residence registration, are eligible, and a family cannot own more than one property when they buy under the new rules. People lacking a Beijing Hukou must prove they made tax payments and contributions to their social security account for five straight years.”
But this might not be enough.
“In terms of policy, we see no grand tightening in the offing, except that banks are extending fewer mortgages,” according to Yao. “Long-term solutions, such as property taxes, land reform, and sustainable funding sources for affordable housing, are still slow to come.”