China’s ur­ban­ites sac­ri­fice to ride prop­erty frenzy

Na­tion­wide new home prices up 11.2%, higher in big cities

Kuwait Times - - BUSINESS -

BEIJING: Ly­dia Su said her heart jumped when she first heard a prop­erty in Shang­hai’s tree-lined French Con­ces­sion was on the mar­ket - even though it was no big­ger than a bath­room - swept up in China’s lat­est prop­erty frenzy.

The 13.7-square meter (147-square foot) apart­ment, the de­tached an­nex of a villa, was priced at 1.8 mil­lion yuan ($267,169), which at about $19,500 per square me­tre ranks it among the world’s most ex­pen­sive res­i­den­tial spa­ces. Though Su even­tu­ally de­cided against the deal, she thought it was cheap. “This is ‘small money’ com­pared to many other prop­er­ties in China,” said the 27-yearold fi­nance pro­fes­sional. Looser gov­ern­ment re­stric­tions and eas­ier credit last year have trig­gered a wave of spec­u­la­tive - and panic - buy­ing. Of­fi­cial data shows Shang­hai home prices are more than a third higher in Septem­ber than a year ear­lier.

And homes in the French Con­ces­sion are a cut above, with av­er­age prices ex­ceed­ing 100,000 yuan per square me­tre, Su said. Na­tion­wide, new home prices were up 11.2 per­cent, the high­est growth on record. China’s big­gest cities - Shang­hai, Beijing, Shen­zhen - have led the rise, but the frenzy is also spilling over into smaller cities in cen­tral China.

The surge has helped sus­tain China’s eco­nomic growth, which held steady at 6.7 per­cent in each of the first three quar­ters. But when prices hit fever pitch at the end of sum­mer, Chi­nese pol­i­cy­mak­ers stepped in to warn about price bub­bles and bal­loon­ing debts.

In early Oc­to­ber, 15 cities an­nounced cool­ing mea­sures, in­clud­ing higher down pay­ment ra­tios on sec­ond homes.

At the end of Septem­ber, out­stand­ing mort­gages to in­di­vid­u­als had jumped by a third to 17.93 tril­lion yuan from a year ago, China’s cen­tral bank said yes­ter­day. There are signs mort­gages are crimp­ing house­hold spend­ing, in an econ­omy in­creas­ingly re­liant on do­mes­tic con­sump­tion.

An­a­lysts also warn that the bull mar­ket is bring­ing for­ward fu­ture de­mand, as peo­ple fear prices run­ning away from them, which could lead to a desta­bi­liz­ing loss of mo­men­tum in the coming months.

“Our re­search showed half of the peo­ple we sur­veyed have brought for­ward their plan to buy a house this year,” said Wang Tao, chief China econ­o­mist at UBS, cit­ing a re­port that sur­veys around 3,000 peo­ple. Con­cerns on sales mo­men­tum are also mak­ing real es­tate devel­op­ers wary of start­ing new con­struc­tion projects.

New starts fell 19.4 per­cent in Septem­ber, the first year-on-year de­cline since De­cem­ber. The prop­erty sec­tor con­trib­uted 8 per­cent to gross do­mes­tic prod­uct growth in the third quar­ter, ac­cord­ing to NBS spokesman Sheng Laiyun, so any weak­en­ing could re­verse that ef­fect.


Shang­hai was one of the ear­li­est cities to an­nounce re­stric­tive mea­sures in March. Ru­mours were rife that it would fur­ther re­strict prop­erty pur­chases in Septem­ber, which led to a jump in con­ve­nient di­vorces to al­low cou­ples to qual­ify to buy mul­ti­ple houses. In China’s tech hub of Shen­zhen, 33-yearold head hunter Ju­lia Qu said she was con­sid­er­ing fak­ing a di­vorce to skirt the 70 per­cent down pay­ment rule on what could be Qu and her hus­band’s third flat, val­ued at 3 mil­lion yuan.

“Fak­ing di­vorces in China is very easy. All you need to do is to get a doc­u­ment at the mar­riage reg­istry. It’s not a real di­vorce,” she said. Qu sold her sec­ond flat in early Oc­to­ber, hop­ing to use the funds to cover the down pay­ment. She said she wanted a big­ger apart­ment for when she has chil­dren and her par­ents re­tire.

She is still bur­dened with monthly mort­gage re­pay­ments from her first apart­ment. “The to­tal mort­gages we are pay­ing are close to our in­come. What is left is only enough for our ba­sic ex­penses,” she said, not­ing that mort­gage re­pay­ments com­monly ac­count for 80 per­cent of fam­ily in­come in Shen­zhen.

“So there’s no more trav­el­ling, ex­pen­sive restau­rants or new clothes,” she said. Beijing na­tive Zoe Zhang is in a sim­i­lar boat, though she bought her apart­ment early last year be­fore the spike. Her monthly salary of 7,000 yuan is mostly swal­lowed by the 5,600 yuan out­go­ings on her 1.2 mil­lion yuan mort­gage. “I used to travel twice or three times ev­ery year when I didn’t take the loan. Right now, con­sid­er­ing the debt on my shoul­ders, I am only able to travel once per year,” she said.

A UBS re­port showed the ra­tio of house prices to house­hold dis­pos­able in­come in first-tier cities had risen to 18 to 20 times from 14.7 times at the end of 2015. “This puts China’s tier-1 cities’ af­ford­abil­ity close to Hong Kong and more ex­pen­sive than London,” the re­port said. New buy­ers mak­ing such sac­ri­fices will be hop­ing to fol­low in Zhang’s foot­steps. “I feel so lucky that I bought the apart­ment last year. Be­cause right af­ter I made the down pay­ment, prop­erty prices started to jump,” she said. —Reuters


BEIJING: A man holds an um­brella as he walks past a sales pro­mo­tion poster placed at the en­trance of an un­der­pass in Beijing yes­ter­day. China’s growth was steady at 6.7 per­cent in the third quar­ter, gov­ern­ment data showed on Wed­nes­day, a sign of sta­bi­liza­tion in the world’s sec­ond-largest econ­omy.

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