International | May 22 2006
By Chris Shaw (Tokyo)
The signs continue to point to overheating in the Chinese property market, where prices in Beijing rose almost 15% and in Shenzhen by almost 25% in the March quarter.
The increase in prices is impacting on affordability, causing concern in the government it could spark unrest among those citizens who can no longer buy their own place to live.
Responding to the price increases, the government has moved to impose additional measure designed to take some of the steam out of the market, particularly through making it less attractive for speculators.
Reports suggest the government will introduce new tax measures, while it is also expected to increase supervisory measures that will limit the amount of land released for luxury homes.
It is also likely to introduce additional measures to limit foreign investment in the property market, a move that could prove significant. CB Richard Ellis Group estimates foreign investors poured US$500m into the Chinese property market in the first quarter, compared to US$1.2bn for the whole of last year.
Putting figures to the amount of building that has been going on, state-run newspapers reported there were 123m square metres of unsold or unleased space as at the end of March, an increase of 24% from the previous year’s figure. This figure doesn’t include any buying by speculators, though the National Bureau of Statistics suggests much of the speculative investments are also unoccupied.
Total investment in the Chinese property market for the March quarter was estimated at more than US$70bn, so the implications of further government actions to slow the market such as higher interest rates and restrictions on building and investment could then flow though into other sectors of the economy, so putting growth under pressure.
