Chinese Home Prices Far Above Assessed Value In Several Cities

Real estate prices continue to rise in a vast majority of major Chinese cities, with properties significantly overvalued in many locations. The IMF claims China’s cooling measures – …

Real estate prices continue to rise in a vast majority of major Chinese cities, with properties significantly overvalued in many locations. The IMF claims China’s cooling measures – including interest rate hikes – aren’t attacking the roots of soaring property inflation, while Moody’s predicts a price correction in 2011. See the following article from Property Wire for more on this.

Real estate prices in China increased 0.3% in November and are now 7.7% higher than a year ago, the latest figures from the National Bureau of Statistics show.

It means prices have now risen for three months in a row in China’s 70 largest and medium sized cities, although the pace of price increases are slowing in the face of an onslaught of measures being introduced by the government to cool down the real estate market.

The November price increases follow a 0.2% rise in October and a 0.5% gain in September.

Prices were up 7.7% in November from the same month last year, down from October’s 8.6% increase.

The figures also show that transactions are up. Sales volume increased 14.5% from a year earlier and transaction values surged 18.6%, the report said.

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The figures show that prices in Beijing increased 0.2%, those in Shanghai went up 0.1% and in Yueyang, a medium sized city in central China, prices climbed 2%. Only six out of the 70 major cities monitored by the government posted a drop in property prices.

‘Beijing will be pleased that house price inflation is continuing to ease. But the pick up in volumes suggest that conditions are still buoyant in the property sector and that more policy measures are required,’ said Brian Jackson, a Hong Kong based strategist at Royal Bank of Canada.

The central bank raised interest rates in October for the first time in three years because of concerns about rising inflation and increases in asset prices. But it will take more time for the effect to be more obvious, according to Sun Mingchun, chief economist at Daiwa Securities Capital Markets in Hong Kong, who expects prices to fall within a 10% range next year.

The figures also show that China’s property investment rose 36.7% to 462.8 billion yuan ($69 billion) in November from a year earlier, and increased 36.5% for the first 11 months of the year to 4.27 trillion yuan.

According to the Chinese Academy of Social Sciences about 35 Chinese large and medium sized cities are overpriced by an average of 29.5%. Seven cities, including the eastern city of Hangzhou near Shanghai, are facing housing bubbles where homes are 50% above their assessed values, its report says.

Although price growth has slowed since the peak in April when property values climbed 12.8%, the slowdown is modest and many analysts believe that more cooling measures will be needed in 2011. These could include further interest rate rises and a property tax to curb the risk of asset bubbles and a sudden fall in home prices.

In a recent working paper the International Monetary Fund said that existing measures ‘at best only treat the symptoms of high residential real estate inflation and not the underlying structural causes’.

According to SouFun Holdings, the country’s biggest real estate website owner, prices in the 100 cities it monitors increased 0.8% in November from October, gaining for a second month even as the central bank raised rates.

According to a report from Moody’s Investors Service the property market is likely to remain stable and a moderate downward price correction can be expected in 2011 as a result of government action.

This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.


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