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House prices climbed 7.1 percent on average in 70 medium and large Chinese cities in a sign that the Beijing government’s efforts to cool the country’s sizzling real estate market have had limited effect.
Figures released by China’s National Bureau of Statistics (NBS) showed that prices rose in all cities across the country, albeit by widely varying degrees. House prices in Beihai were up 15.5 percent and the prices in Shenzhen climbed 13.9 percent in June 2007 from the same month a year earlier. Beijing recorded more modest growth of 9.5 percent, while economic hub Shanghai reported a lackluster 1.2 percent increase due principally to oversupply.
The house price inflation has been fuelled by organic demand for new homes from China’s burgeoning middle class, but also by foreign and domestic investors. In many areas, prices have risen so far so fast that many families have been priced out of the property market.
Taxes, lending rules, interest rates fail to cool boom
Last year, the Chinese government tightened rules on lending to developers, strengthened its supervision of land use and took steps to better enforce tax policies in a bid to cool the real estate boom. Those efforts have continued since, most recently in the Chinese central bank’s decision to raise its one-year benchmark lending rates by 0.27 percentage points to 6.84 percent.
However, the efforts to slow the surge in house prices appear to have had limited effect and have failed to deter foreign and domestic investors.
The NBS said investment in Chinese real estate soared 28.5 percent, reaching 988.7 billion yuan (US$130.6 billion) in the first half of 2007. That increase was 1.6 percentage points higher than the first quarter of the year and 4.3 percentage points higher than the same six-month period last year. Meanwhile, domestic bank loans have risen 25.9 percent year-on-year.
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