On Housing Prices, Chinese Statistics Say One Thing, Then Another

December 18, 2010 1:49 pm Last Updated: October 1, 2015 6:12 pm

High-Priced High Rises Crowd China's Cities. (Teh Eng Koon/AFP/Getty Images)
High-Priced High Rises Crowd China's Cities. (Teh Eng Koon/AFP/Getty Images)
The Chinese Academy of Social Sciences (CASS) has released contradictory forecasts for next year’s housing prices.

On Dec. 8, in its Housing Green Book, CASS claimed that China’s real estate market will continue to adjust in 2011 and house prices will stabilize and decrease slightly. Yet in its “Economic Blue Book” released just the day before, CASS predicts a rebound in home prices, with a possible increase of 20 to 25 percent or even higher.

According to an article by Beijing Business Today, the Green Book states that since the central government is very determined to regulate the real estate market, the quantity of government-regulated low-income housing will increase significantly next year and speculative investment in housing will be further inhibited, so home prices are expected to stabilize and then fall slightly. However, the Blue Book indicates that housing regulation may be relaxed next year.

A statistics expert in China who asked not to be named told Beijing Business Today that the reason for such a big discrepancy in CASS’s two predictions is that there is no uniform standard for scientific computation. They were based on an evaluation of the current policy and economic environment, but lack the support of basic research data.

How much did home prices increase this year? According to statistics in the Blue Book, the average price of commercial and residential real estate rose 15 percent this year compared to last year, but the housing sales prices for 70 large and mid-sized cities across the country released by National Bureau of Statistics (NBS) showed an average increase of 10.5 percent.

In 2009, there was also a huge gap between two statistics on home price increases. A research institute under the Ministry of Land and Resources indicated the increase had reached 25.1 percent, almost 20 times the 1.5 percent released by the NBS.

In fact, this is not the first time there have been contradictory forecasts on housing. In 2008, the Beijing Economic Blue Book predicted that home prices would not drop, but the Beijing Social Blue Book forecasted that they definitely would.

Conflicting Regional and National Data

This year, contradictions between regional and national data are being seen in Shenzhen and some other areas.

For example, it is not clear whether home prices in Shenzhen rose or fell in November. China’s real estate index system showed that based on a full sample survey data of 100 cities, Shenzhen’s new residential house price was 24,601 yuan (US$3,694.32) per square meter, the country’s highest. However, statistics from the Urban Planning, Land and Resources Commission of Shenzhen Municipality showed that Shenzhen’s average new residential house price was 18,061 yuan (US$2,712.22) per square meter, a decrease of 16 percent from the 21,513 yuan (US$3,229.88) in October. The national and regional data differ by 6,000 yuan (US$901).

Home prices in Fuzhou have also “dropped” rapidly. According to a report from The China Index Research Institute, the average residential house price in Fuzhou City reached 13,826 yuan (US$2,076.24) per square meter in August, seventh in rank among 35 major cities. In October, the price dropped to 11,987 yuan (US$1,800.09), and ranked tenth. It has been reported that even prior to October, Fuzhou City had taken measures to limit or delay granting presale permits for high-priced buildings under construction, which effectively decreased the sales of housing in “high price areas” immediately.

An industry source told Outlook Weekly that some major cities in the North, including Beijing, have adopted a similar approach, i.e., delay the construction of high-priced housing in downtown areas while increasing sales of affordable housing in rural areas; since this lessens the supply and increases the price of luxury housing while doing the opposite at the low end, the central government and real estate groups are effectively hoodwinking the public. As the effect of the regulatory policy subsides, housing prices will rise in retaliation, the industry source commented.

Economist Cao An said that the Chinese regime has realized that the real estate bubble is serious; on the one hand it wants to stop the bubble from growing bigger, but at the same time, it worries that real estate prices could drop too rapidly. A price decline in the real estate market of more than 20 to 30 percent could cause it to collapse, and since real estate is an important revenue source for the regime, the bubble’s burst will substantially reduce revenue.

Though the Chinese regime has introduced more than 60 regulatory policies on real estate, some experts still believe that house prices can continue to rise. Cao said that some people think that they will not fall immediately because the regime is still implementing a loose monetary policy. If a large amount of money is injected into the market, people will buy a house to hedge against inflation. Hence, both sides (price increase or decline) have their own arguments, and both have some truth behind them.

Cao believes that China’s real estate bubble will burst, and its timing depends on the critical point of the overall Chinese economy. Once that point is reached, it will trigger a massive burst of the housing bubble.

Read the original Chinese article. http://www.epochtimes.com/gb/10/12/14/n3112761.htm