Despite a series of state policies and regulations implemented to control the overheated property sector, housing prices keep soaring in China. Xiaokang magazine provides a detailed analysis of the price hike in ten cities, hoping it shed light on this phenomenon.
Beijing: land in short supply
"The long procedure of land marketing results in the short supply of available land in Beijing," said Liu Weixin, a researcher with the Chinese Academy of Sciences. "And we must keep in mind that land is a limited resource that cannot be supplied infinitely."
Furthermore, as the national political and cultural center, a great number of people flood into Beijing annually and fuel the housing market. Many graduates also choose to work and settle down here. "Huge demand and short supply has caused a price hike here," Liu observed.
He also disputes the opinion that the 2008 Beijing Olympic Games will be a turning point in the price hike, saying that after 2008, Beijing will still be the capital and the influx of population will not change. The land in need will still be in short supply and thus the price will not fall.
Shenzhen: convenient travel to HK
The housing price in Shenzhen, the first special economic zone in China, has seen continual growth since the end of 2005. The average price of housing in the downtown area is 15,000-20,000 yuan (US$1,980-2,630) per square meter while that of luxury housing is 35,000-45,000 yuan (US$4,610-5,920) per square meter.
On the other hand, the average price in neighboring Hong Kong is 20,000-30,000 yuan (US$ 2,630-3,950), almost double than that in Shenzhen. Additionally, Hong Kong residents' GDP per capita was US$38,127 in 2006 while that in Shenzhen was only US$8,619.
"Many Hong Kong residents buy houses in Shenzhen for the convenient transportation and comparatively low price," said Professor Ye Jianping, dean of the Land Management Department of Renmin University of China.
With the impending opening of the highway connecting Shenzhen's Nanshan district and Hong Kong, housing prices in this area increased to 22,000 yuan (US$2,897) per square meter in just one week, according to industrial insiders.
Tianjin: close ties with Beijing
A similar pattern can be seen in Tianjin. Expressways and bullet trains between Beijing and Tianjin have enhanced their connections; for example, it now takes only 65 minutes by car to travel from Tianjin to Wangfujing, a downtown commercial street in Beijing. Many people working in Beijing are considering buying houses in Tianjin.
Statistics show that in first half of this year, the average housing price in Tianjin was 5,819 yuan (US$766) per square meter, up over 16 percent from the previous year. The business volume of commercial housing was 3.62 million square meters, 16.6 percent up. In the first quarter, investment in the property sector increased 22.3 percent and the developing index of real estate was 14.85 up from the same period last year.
As an industrial city in northern China, Tianjin also has its own dynamic economy. The transportation advantage will bring more capital and population there as well as great opportunity in real estate.
Guangzhou: dynamic capital city
The once stable real estate market in Guangzhou, capital city of South China's Guangdong Province, has witnessed a price hike since this June. The average price in six downtown districts increased almost 1,000 yuan (US$131.7) per square meter in just one month.
"With an expectation of long-term development for the Chinese economy, the property sector has become a hot spot for investment and the prices in Guangzhou will naturally increase," said Professor Ye. "The provincial government should guarantee ordinary people's interests by strengthening construction of economically-affordable housing and promoting projects on low-rent housing," he advised.
Beihai: beauty at a cost
The price increase of new commercial housing in Beihai, a coastal city in south China's Guangxi Zhuang Autonomous Region, has topped the national list for three consecutive months, according to figures released by the National Development and Reform Commission.
Mayor Lian Younong views the soar as the result of the recovery of the real estate market. Housing prices in Beihai slumped from 10,000 yuan (US$1,317) to 400 yuan (US$52.7) per square meter after the property bubble popped in 1993. Most of the commercial housing sold before 2006 was formerly incompleted projects with price averaging at 1,200 yuan (US$158) per square meter. All projects sold this year are newly constructed with a cost of about 1,500 yuan (US$197.6) per square meter and average price about 2,300 yuan (US$303) per square meter.
He foresees more room for rising costs: "As a famous tourism destination and one of the ten most livable cities in China, prices here will continue growing with economic development and maybe keep the top position."
According to Wu Haiyan, deputy director of Beihai Real Estate Trading Center, the percentage of houses purchased by non-natives is increasing with 35 percent in 2005, 43 percent in 2006, and 52 percent in the first quarter of this year.
Shanghai: World Expo
The real estate market in Shanghai got a new momentum after the city's successful bid to hold the 2010 World Expo.
According to research conducted by Fortune magazine, 92 percent of more than 40,000 multinational corporations consider establishing regional headquarters in China and 45 percent among them choose Shanghai as the first choice.
By holding the World Expo, Shanghai's image as a cosmopolis and a financial hub in China will be reinforced and its housing prices will keep growing steadily with the increase of its value.
Hangzhou: house or investment tool?
Housing prices in Hangzhou, a city famous for its West Lake in east China's Zhejiang Province, reached 10,000 yuan (US$1,317) per square meter this year. However, the rate between price and disposable income in Hangzhou has reached 10:1, much over the international standard of 3:1-6:1.
Who buy these expensive houses? And for what purpose?
According to Wang Zhigang, an industrial insider, the real estate market in Hangzhou is stirred up by the outside wealthy. Named as a heaven on earth, its livable environment and tourism resources attract many investors from home and abroad, especially those from affluent neighboring areas within the province. They buy houses here both for living and investment.
Nanjing: rigid demand increase
Nanjing, capital city of Jiangsu Province, has set records in housing prices when a new project's price jumped by 1,200 yuan (US$158) per square meter in two hours.
Great demand has caused the price hike, observed by Gu Yin, director of the Nanjing Branch of National Real Estate Indices. In previous years, many people were wait-and-see on purchasing houses. However, after entering 2007, rigid demand for marriage and relocation has increased while supply has not.
"With a national growth of house prices, tight control of lands and loans, as well as growing demand, the cost of housing in Nanjing will keep rising," he analyzed.
Chongqing: municipality effect
As the youngest municipality, Chongqing just celebrated its tenth birthday. Residents here were once called the happiest house buyers for the cheap price. In 2006, the average price was 2,700 yuan (US$ 356) per square meter, equaling to the average monthly income.
But from June 17 to 25 this year, merely in nine days, the average price soared from 2,800 yuan (US$369) to 3,055 yuan (US$403), a 7.6 percent increase.
"The tenth anniversary is a turning point of Chongqing's house price growth," said He Zhiya, vice chairman of Planning Council in Chongqing. "Economic growth and social stability enhance people's confidence for future development. And prices here are pretty low compared with Beijing and Shanghai. So it is normal for a price hike in Chongqing," He added.
Chengdu: investing in a central area
Projects in downtown Chengdu, capital city of southwest China's Sichuan Province, sold well recently due to a popular concept of investing in a central area.
The prices downtown increased from 3,000 yuan (US$395) in 2002 to 10,000 yuan (US$1,317) in 2007. As a new special zone, Chengdu has huge potential in economic development and rich historic and cultural heritage. These make it a new hot spot for investment and naturally there is a hike in housing prices.
With the operation of two metro lines, more price soars are expected in Chengdu's downtown areas.
"To solve the contradiction between price and purchasing power, polices should focus on deeper problems, like the distribution and supply systems," said Zhao Xiao, a professor with the School of Economic Management at the University of Science and Technology in Beijing.
The broadening income and distribution gaps have affected the property sector. Going to market alone could not solve the low-income bracket's demand for housing. It also needs social security systems. Although the government has spent a lot on constructing housing security systems since 2006, there is still a long way to go.
"When judging a trend in the real estate market, developers should not be misled by large amount of capital and only pursue the high profit made by luxury residencies. They should watch out for the risks of capital driven by short profit," advised Zuo Xiaolei, chief economist for China Galaxy Securities.
"The property sector will play a large role in development in the long term. However, the policy makers should pay more attention to the construction of middle and low-end housing to meet the effective demand which could not be fully represented by a huge money flow."
(China.org.cn by Li Shen, September 1, 2007)