Top Biz News

Facing a capital surge

By Cheng Yingqi (China Daily)
Updated: 2009-12-16 07:43

Beijing's soaring real estate market could put a crimp in Wei Wei's wedding plans.

"I have to buy an apartment if I want to marry my fiancee," said the sales manager of a German-based company.

"Even though the price is already too high for me, I'm not sure if it will continue to surge in 2010, and if it rises more I won't be able to afford it."

That kind of pressure pushed him to make one of the most expensive decisions of his life - buying a home.

"I simply couldn't wait."

He is not alone.

Real estate experts say a real-estate bubble is posing a danger to the market.

"Speculation is running wild in the market, but solid demand for housing is often overlooked in its effect on driving up housing prices," said Qu Weidong, a professional in real estate economics and management of Renmin University of China.

"But there are also things the government can do to promote a healthier real-estate market."

In a normal housing market, prices float at 20 to 25 times annual rent. But the average housing price has risen to 30 or 40 times the yearly rental fee of an apartment in Beijing, Qu's research has shown.

"The real estate market is different from the stock market. Speculators will choose to wait and see when the market is nervous, like it is in Beijing these months," Qu said.

Mo Jun cannot agree more.

Mo sold his apartment in Beijing to Wei last week.

"If I didn't sell it now, the purchasers would look on from the sidelines next month when the real estate policy changes."

Those changes include a tax to encourage or restrain the secondhand housing market.

According to the latest data released by the Beijing Bureau of Statistics, the turnover on Beijing's secondhand housing fluctuated around 8,000 sales a month during March and October. Yet November has seen a sudden increase surpassing 13,000 transactions. As for housing prices, notable surges took place in March, September and October.

"Why does sharp price volatility arise both at the beginning and at the end of this year? Because government policies change at those times, and people adjust their expectations according to housing prices," Qu said.

"Housing prices in Beijing will keep on rising, but the radical changes reflect an irrational market which is quite dangerous," Qu said.

The danger lies mainly in the non-transparency of the market, which "makes the rich get richer while the poor get poorer".

A China Daily reporter visited several leasing agents and a land agent surnamed Liu said some of the purchasers buy new houses with the sole aim of selling them later.

"There is a house owner who bought an apartment two years ago in Shi Ji Cheng housing estate. He sold it last week. The apartment hasn't been decorated since he bought it. The owner hadn't even rented it to anyone, and he and his family had never lived in it," Liu said.

"The real estate industry features an imbalance of access to information and rationality. This is true not only in China but also worldwide," Qu said.

"Now people have neither access to policy intentions, nor to up-to-date statistics. The only thing they can use to learn about the current market is to listen to agents who monopolize the information," Qu said.

This can partly explain the reason why the policy changes caused so much panic when the State Council, the country's Cabinet, announced its plan to raise the cost of secondhand housing transactions in the coming year.

"Macro regulation and control shouldn't be radical," Qu said.

"The major problem of the Chinese real estate market is the market fluctuations."