Real-estate Frenzy Still on despite Price Curbs

The red-hot property market in China is maintaining its momentum at the year-end despite government curbs. Market analysts fear the home price surge can't be stopped, even with the recent interest rate rise. Our reporter Wang Ling has more.

The Property market has picked up strength in Beijing, Shanghai, Guangzhou and Shenzhen after growth slowed down a bit in October.

Last week, in Beijing 3,500 new apartments were sold, 20 percent more than the previous week. Meanwhile, Shanghai's average home price surged ten percent to top 22 thousand yuan per square metres, and in Guangzhou, apartment sales surged by 70 percent within one week.

China's home prices have now been rising non-stop for 18th months. Unaffordable home prices have now becomes a joke to many wage-earners.

"The price is really beyond our reach. An apartment by the fourth ring road in Beijing is going for about 2 million yuan, which is 25 to 30 years of my monthly income."

The central government started to take action as early as April, including suspending mortgages for third-home purchases and pledging to speed up trials of property taxes to restrain foreign capital and cool property prices.

Local authorities also unveiled tough measures. Beijing, for example, brought in a regulation stipulating that one family can only buy one new apartment in the city. Ma Guangyuan from the Chinese Academy of Social Sciences, says good policy needs forceful implementation.

"In general, the regulations by Beijing's municipal government are good, concerning cracking down on speculation and adding supply. But we need to implement each regulation. True need within the property market will be triggered only after home prices come down."

Recognizing the government measures were not well-implemented, premier Wen Jiabao vowed over the weekend to let home prices return to a "reasonable level" during his term that ends in 2012.

One day ahead of Wen's remarks, the central bank raised China's borrowing costs, the second time within two months. But Li Wenjie from real estate agency Centaline Group, says it will not have an immediate effect.

"It will not affect home price instantly as a whole, but the interest rate rise may change people's expectations. The influence on the market may be seen from higher interest rates and the government move to tighten liquidity."

Li adds the recent interest rate rise may refrain transactions to some extend, but a longer term effect depends on more policies that follow.

For CRI, I'm Wang Ling.