China's property bubble getting worse

BEIJING: A Chinese government think tank has warned the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent, state media reported Thursday.

Of the 35 major cities surveyed, property prices in eleven including Beijing and Shanghai were between 30 and 50 per cent above their market value, the China Daily said, citing the Chinese Academy of Social Sciences.

Prices in Fuzhou, capital of the southeastern province of Fujian, had the worst property bubble with average house prices more than 70 per cent higher than their market value, according to the survey conducted in September.

The average price in the 35 cities surveyed was nearly 30 per cent above the market value, the report said.

Property prices have remained stubbornly high despite the government adopting a slew of measures since April including hiking minimum downpayments to at least 30 per cent and ordering banks not to provide loans for third home purchases.

Prices in 70 major cities were up 0.2 percent in October from the previous month and 8.6 percent higher than a year ago, official data showed.

The increase came after prices gained 0.5 per cent month on month in September, which was the first increase since May.

Massive stimulus measures taken since 2008 to fend off the financial crisis injected huge amounts of liquidity in the market and have been blamed for fuelling real estate prices.

"The government target is not clear and policy is incoherent," CASS senior research Ni Pengfei was quoted saying.

By AFP