China’s home values on the rise as prices gets out of control

China’s home values on the rise as prices gets out of control

Real estate, a vital source of growth for China’s economy, has bounced back quickly from the COVID-19 crisis. But a relentless rise in home prices in big cities, which is now spilling over into nearby smaller ones, has raised concerns about overheating.

China’s swift recovery has provided vital support through the pandemic for the global economy and multinational companies, offering a strong source of demand for consumer goods and raw materials. While China’s exporters are enjoying strong demand, global supply chain bottlenecks and rising raw materials costs have weighed on production, cooling the blistering economic recovery from last year’s COVID-19 slump.

China’s gross domestic product expanded 6.5 per cent in the final quarter of last year, making it one of the few countries to register positive full-year economic growth. Beijing has already set a target of at least 6 per cent growth for 2021.

Beijing, Shanghai, Shenzhen and Guangzhou rose 0.6 percent month on month in April, compared with a 0.4-percent increase registered in March, according to data from the National Bureau of Statistics.

The prices of new homes in Chongqing, home to Ford Motor’s Chinese state-owned partner Changan Automobile, increased by 1.4 per cent in April while the prices of lived-in homes rose 1.3 per cent.

Chongqing has the fifth-largest regional economy in China, behind only China’s four tier-one cities Beijing, Shanghai, Shenzhen and Guangzhou.

A total of 31 second-tier cities saw a month-on-month increase of 0.6 percent in new home prices, while 35 third-tier cities witnessed a month-on-month rise of 0.4 percent in new home prices last month.

The average price of new homes across 70 major cities rose 4.8 per cent in April, from a year ago, according to the National Bureau of Statistics (NBS). Prices increased in 62 of the 70 cities tracked by the NBS.

NBS spokesman Fu Linghui said while China’s economy showed a steady improvement in April, new problems are also emerging, notably the rise in international commodity prices.

He also state that “For companies as a whole, price increases are conducive to the improvement of corporate efficiency, but the pressure on downstream industries needs to be paid attention to,”

President Xi Jinping in April stated that “for living in, not for speculation” when chairing a meeting of China’s 25-member Politburo, the Communist Party’s top ruling body. Last week, policymakers signaled they may revive efforts to introduce a long-delayed national real estate tax via a trial.

The Chinese government is anxious to prevent any grievances from housing affordability from spilling over into social instability, as it grapples to keep the economy growing amid the coronavirus pandemic. Homes have become so expensive that Chinese couples are putting off having a second child, undermining government efforts to boost the population, according to a Beike Research Institute survey last November.

Lu Wenxi, Chief Analyst,  property agency Centaline stated that “Local governments have become more surgical in their management of the housing market, unlike previous sweeping crackdowns, thus home buying demand for living in or for investment in big cities hasn’t been fully crowded out,”


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