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Residential property prices continue to rise across many of the major cities in China, while the number of real estate developments increases around the country.
The National Bureau of Statistics of China recorded annual price growth of up to 20.6 per cent for newly constructed commercial residential buildings over the month of September, indicating the market is indeed trending upward.
At the same time, existing residential properties saw similar price growth at a level of 17.8 per cent in some areas, demonstrating the resilience of recently constructed homes over existing dwellings.
While these results are good for current owners of investment properties across major cities in China, some economists have expressed their concerns over the occurrence of another property market bubble.
In an October 22 Bloomberg article, Australia and New Zealand Banking Group (ANZ) Economist Liu Li-Gang said in an interview that house prices in China have grown significantly over the year.
"Home prices, especially in big cities, are a bit out of control," Mr Li-Gang said in an interview with Bloomberg.
"China's facing an increasing risk of a property bubble."
This opinion has also been shared by Andy Xie at MarketWatch, who said in an August 12 article that the country is still experiencing a property bubble.
"Further, there is consensus in the global financial market that China's property market is a bubble. If some policy is introduced to prolong it, the negative segment would worsen, triggering massive short selling of the yuan," said Mr Xie in the article.
However, Mr Xie stated that it's more the commercial property market that is currently in a housing bubble than residential, as most cities already have a significant level of commercial space.
"Much of the speculative excesses have been diverted to the commercial side. This is why the building of commercial properties exceeds that of residential properties," said Mr Xie.
In order to control some of the price growth in China's real estate market, the government will be increasing the supply of more affordable homes in Beijing for those in the middle-income bracket.
According to an October 23 statement from the Beijing Housing Commission, this will be done to balance the supply of homes while supporting the demand for middle-income earners.
Once this is implemented, it may help reduce the risk of a property bubble occurring, as there will be more affordable options for many families across the region of Beijing.
For more information about investing in China's real estate market, contact Ray White Group at www.raywhite.com.
