China Housing Prices Up For 17th Straight Month – BOC Sounds Bubble Alert

Housing prices in mainland China rose an average 2.83 percent in September compared to the August, as more experts warn of a housing bubble. The Bank of China was the latest to raise concerns over the country’s real estate market, concluding that inflated property values pose the biggest risk to the overall economy.

Any fears of a coming crash have done little to cool down housing prices in China that are now up 16.64 percent on average over the past 12 months, according to newly released data from the China Index Academy. A total of 81 cities in the top 100 list recorded home price increases last month with the largest jumps occurring in second and third tier cities where officials had yet to enact measures to suppress demand.

Zhengzhou in Henan province saw the largest increase in September with housing prices rising 6.92 percent. Further south, Wuxi in Jiangsu had the second largest increase at 6.83 percent and its neighbor Changzhou home prices saw home prices rise 6.6 percent after contracting 0.24 percent in August.

Shenzhen once again finished with the most expensive residential real estate in China with new homes selling at an average of RMB 55,001 ($8236) per square metre in September. Home prices in the tech hub increased 0.96 percent during the month and have now risen 41.8 percent in the last year.

State-Owned Financial Giant Worried About Housing Bubble

China’s rising housing prices have not gone unnoticed and financial heavyweight Bank of China is the latest to voice concerns. In its quarterly economic outlook the state-owned bank noted that the government is struggling to find a balance between stabilizing overall economic growth and curbing asset bubbles.

“A property bubble is the biggest risk for China’s economy,” Zhou Jingtong, a senior economist at the mainland’s fourth largest lender, was quoted as saying by the South China Morning Post. “Property speculation becomes common practice and everyone is dreaming about windfall profits overnight … these are very dangerous.”

The 104-year-old institution joins Dalian Wanda chairman Wang Jianlin in warning of a housing bubble. China’s richest man said last week that the country was facing the biggest bubble in history and added the government would struggle to find a solution.

More Cities Roll Out Curbs

Several cities in China, including Beijing, Chengdu, Hefei, Suzhou, Tianjin and Zhengzhou, announced new measures during the past few days to cool off the overheated housing markets.

In Beijing, where home prices jumped 3.88 percent in September and now sit at RMB 40,438 ($6,059) per square metre, the government announced first-time homebuyers would have to put down 35 percent to buy a home —  up five percent from previous rules. Those buying a second home will now be required to make 50 percent down payment for units less than 144 square metres and 70 percent if the unit is larger than that threshold.

Following its big jump, the government of Zhengzhou barred buyers from acquiring a third property in some locations, while Hefei adopted similar measures and went a step further by restricting non-local residents from owning more than one property. In the short term, it appears as if local governments will continue to be the ones to address property market issues as they see fit.

“There will not be a holistic plan to address the property market,” Iris Pang, senior economist for Greater China at Natixis SA in Hong Kong, told Bloomberg. “Local governments are the ones who will work out their own measures.”