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China Focus: Warming housing market unnerves buyers

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BEIJING, July 5 (Xinhua) -- Defying government ambitions to bring home prices down to reasonable levels, China's gradually warming housing market is once again putting prospective homeowners in a panic.

After nine straight months of declines, average home prices in 100 Chinese cities rose 0.05 percent in June from the previous month, data from the China Index Academy showed.

The increase followed a rebound in home prices in recent months, as buyers rushed to the market over fears of a policy shift in the sector after China's slowing economy triggered concerns that the government might compromise its control efforts to sustain growth.

Home sales in Beijing jumped to 25,602 units in June, 10.5 percent more than in May and 50.6 percent more than June 2011, according to figures from the municipal commission of housing and urban-rural development.

Alerted by the warming signs, some potential home-buyers who previously took a "wait and see" attitude toward the market started buying property over fears of further rises, driving up market expectations and making the sector's dynamics even more unpredictable.

Sang Ye, a 25-year-old employee at an Internet firm, had been hunting for a three-room second-hand house since the end of last year while waiting for her boyfriend, who is not a registered resident of the city, to obtain documentation proving that he has paid social security or income taxes for the last five years.

Beijing's relevant authorities ban people who are not registered to live in the city from buying houses unless they have paid social security or income taxes in the city for a period of five years.

Although Sang's boyfriend was able to obtain the documentation in late March, prices had already crept up. Their opportunity to get a good deal seemed to have disappeared forever.

"Sellers are increasing prices as the market warms. The same type of apartment in the same area is now 300,000 yuan (47,619 U.S. dollars) to 600,000 yuan more expensive than it was at the end of last year," Sang said.

She said real estate agencies and media reports have also helped to fuel the recent panic-buying.

The People's Daily, the flagship newspaper of the Communist Party of China (CPC), carried a commentary on Wednesday saying that risks concerning price rebounds are accumulating and require more attention from the government.

Wang Xiaoguang, a researcher from the Chinese Academy of Governance, an advisory body to the central government, said the property market is indeed showing warming signs, but a subsequent surge is unlikely, as the government seems to have no intention of easing its controls.

The slowing of China's economy has triggered concerns that overall economic growth be impacted if housing prices fall too quickly or by too much.

Property accounts for about one-fifth of China's fixed-asset investments, therefore acting as a major engine for the world's second-biggest economy.

Flagging exports and restrictions on the property sector pared China's economic growth to 8.1 percent in the first quarter, the slowest pace in almost three years.

Several central government departments, including the central bank and housing regulators, last month dampened expectations for measures to ease property controls, saying their policies for the sector will not change.

Yi Xianrong, a finance researcher with the Chinese Academy of Social Sciences, a government think tank, said cooling capital flow to the property market will also help contain sharp rises in the market.

"Capital flow to the housing sector has slowed significantly since the financial crisis," he said.

In 2009, capital flow into the sector rose 45 percent year on year. In 2010 and 2011, the growth dropped to 25.2 percent and 14.1 percent, respectively.

Although significant price rebounds are unlikely, policymakers should not overlook market changes, said Chen Guoqiang, vice chairman of the China Real Estate Society.

"Under the current circumstances, ensuring supplies and guiding first-time buyers into the market, as well as avoiding panic-driven price hikes, should be the focus of any policy adjustments," he said.

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