House prices in China’s 35 cities kept rising in the third quarter, according to a survey conducted jointly by the State Development Planning Commission and National Bureau of Statistics.
Rising Housing Price
With the nation’s further reform of its housing system and accelerated opening-up of the secondary real estate market, real estate companies now pay greater attention to house quality, building technology, high-class community construction and advertisement. House prices in 35 cities nationwide have been up 4 percent averagely over the same period of last year, and 1.2 percent higher than the second quarter. The average price of private-owned house, in particular, rose 12.9 percent.
The average land trading price rose 6.3 percent over last year. It was caused by three reasons: adjustment of land trading price in some areas; introduction of auction or biding into land dealing; and decreasing land supply in some places.
House rent is also rising. In the third quarter, the average house rent in these cities rose 1.1 percent, compared with last year. Due to the slow increase of public housing rent, the average residential house rent rose 2.5 percent, and that of commercial house rose 0.4 percent.
Real Estate Bubble Warned
In China’s southeast costal areas and some cities in the western regions, prices of real estate surge quickly. Experts say that real estate bubble exists in the majority of the cities surveyed.
The standard ratio between house price and a household’s average annual disposable income in developed countries is 6:1 to 10:1. Considering China’s economic condition and people’s consumption ability, the ratio for China should be kept between 5:1 to 6:1.
However, the survey indicates that in many cities, the ratio between house price (for an 100 sq. meter apartment) and the average disposable income per household (average 3.4 person each family) is higher than 6:1. In cities such as Beijing, Shenyang, Guiyang, Nanjing, Guangzhou, Dalian and Xi’an, it has exceeded 10. The average nationwide ratio in 2001 was 7.8:1.
House Price Analysis in 35 Cities
According to the survey, real estate bubble is most serious in Northeast China. For example, in Shenyang, capital of Liaoning Province, where the average household annual income is 21,713 yuan(US$2,623), only the 70 percent of national average, its house price has reached 296,820 yuan(US$35,860), 22 percent higher than the national average. Dalian has also been in the similar situation. Changchun, and Harbin, capitals of Heilongjiang and Jilin respectively, also suffer unreasonable ratios between the average household income and housing price.
Average house price in North China was driven up by Beijing’s sky-high price. With its average house price of 488,370 yuan(US$59,002) and its annual disposable income per household of 39,365 yuan(US$4,756), Beijing’s ratio between house price and income is 12.4:1, the second highest city in China, following Shenyang.
In Shanghai, with the average household income of 43,804 yuan(US$5,292) and house price of 382,060 yuan(US$46,158), the ratio is moderate. In Ningbo, Zhejiang Province, the house price, 238,680 yuan(US$28,836), is lower than the national average, but its annual disposable income per household, 40,769 yuan(US$4,926), is much higher than the national average. In Nanjing, capital of Jiangsu Province, the annual disposable income per household is only 30,084 yuan(US$3,635), lower than the national average, but its house price, 357,920 yuan(US$43,242), is the fifth highest, following Shenzhen, Guangzhou, Beijing and Shanghai.
In South China, Shenzhen’s house price, about 692,120 yuan(US$83,619), is the highest in China, but its annual disposable income per household has reached 77,087 yuan(US$9,313), also the highest nationwide. Guangzhou takes the second in terms of housing price, 495,720 yuan(US$59,891), but its annual disposable income per household is obviously higher than the rest of China.
House price in Guiyang, capital of Southwest China’s Guizhou Province, is 286,050 yuan(US$34,559), the highest in the region, but its annual disposable income per household is only 22,852 yuan(US$2,761), the lowest of the region.
Comparing with other less developed areas, the house price of Northwest China is more reasonable, except Xi’an, capital of Shaanxi Province and the leading city of the region, where the house price has reached 233,760 yuan(US$28,242), the highest in the region, making its ratio between house price and household income rise to 10:1.
Macro-control Measures Needed
Land is a crucial factor for real estate developers. Measures have been taken in some regions to supervise the development of land resources. Still, more effective control is needed nationwide.
Actually, the ratio of houses for the varied demands of high-, middle- and low-income households is out of balance. In some regions, economy-class houses are out of supply, while the number of vacant houses is continuously rising. Therefore, effective measures should be taken.
Firstly, the structure of different grade of houses should be adjusted and prices be reasoned accordingly. Secondly, open and perfect the secondary real estate market. Thirdly, strengthen supervision of housing construction and sales, and control the land resources to prevent overheating house construction.
(china.org.cn by Tang Fuchun October 31, 2002)