Home Prices In China Still Rising But Harvard Brushes Off Bubble Fears

The China Index Academy finally released their monthly data on the country’s housing market and while home prices didn’t rise at the eye-melting pace of previous months, the average price of homes in China continued to climb — rising 1.65 percent in October. The step up marks the 18^th straight month home prices in China have climbed.

Following a barrage of policy restrictions on home sales, a total of 81 cities in the top 100 list still saw home prices rise. However, October’s increases in most cities were more modest than in previous months.

In Shenzhen, China’s most expensive home market, home prices rose 0.27 percent in October, down from the 0.96 percent increase in September. Prices in Shanghai were up again, but growth has slowed to 1.09 percent last month after rising 3.54 percent in September.

The biggest price jumps continue to be recorded in second and third tier cities with Changsha seeing the biggest monthly increase. Home prices in the capital of Hunan province rose 4.08 percent in October. Other cities seeing significant spikes were Chongqing where prices were up 3.08 percent and Hangzhou, which recorded a 2.99 percent increase.

With 22 cities having implemented some form of curbing measures in the past few months, the report declared success in the government’s battle to cool the country’s overheated housing market, despite the fact prices throughout China still having increased.

“Rein-in policies launched in many cities across the country around the National Day holiday have made preliminary achievement in cooling down the overheated property market,” the report proclaimed.

Dude, Where’s My Home Price Data?

Those diehards who can’t get enough of China’s housing numbers were made to wait for this month’s figures. Normally released at the end of the month, October’s data wasn’t made available by the China Index Academy until last Friday. The Academy’s major competitor, CRIC also failed to report on China’s housing prices at the end of last month, the first time in more than two years that the two reporting services had delay their reports.

The latest home price reveal comes nearly a month after the National Bureau of Statistics released a very special mid-month set of statistics for the very first time in the organization’s history.

The mid-month data, which alluded to a housing market that was cooling, were bundled together with September’s figures that saw China’s new home prices post their biggest monthly gain this decade. Both the Index Academy and CRIC rely to a substantial extent on government data for their market figures, although their reports are published independently of the statistics bureau’s.

Harvard Believes China’s Housing Boom Could Be Sustainable

While this latest round of home price increases will lead to further talk of a bubble, one US scholar believes such fears could be overblown.

“In many respects, China looks like a classic housing bubble. Prices have soared. New construction is enormous. Vacancies are large and pervasive. It is tempting to view these events from afar and conclude that a price drop is imminent,” Harvard scholar Edward Glaeser concluded in the paper, “As we try to demonstrate, this scenario is far from certain.”

Glaeser’s views were published last month, by the US National Bureau of Economic Research in a working paper by a team of Harvard University scholars. The researchers theorised that demand for real estate in China is so strong that current prices might be sustainable, especially given the sparse alternative investments for Chinese households. As a caveat, the scholars added that averting a downturn could only happen if the level of new supply is radically curtailed.