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CASS: Imbalance in Housing Market, Price Hikes to Continue

According to the National Bureau of Statistics, for the month of March 2013, 68 out of the 70 cities across the country saw housing prices rise higher than the previous month. A report, released by the Chinese Academy of Social Sciences (CASS), pointed to the observation that overall prices of real estate rebounded after the State Council’s February measures to curb housing prices. The report warned of the fact that supply and demand in the housing market are out of balance and that prices face the danger of getting completely out of control.

The industry generally believes that, by adopting means under a planned economy to handle commercial residential real estates driven by market forces, the government has moved on the wrong direction in its current real estate market regulation policy.

In analyzing the causes of the current round of price increases, Bowen Xi, a manager at a real estate company, mentioned three main factors. The first is the fiscal pressure of local governments. At present, only Beijing city has implemented the 20 percent transaction tax; other cities are looking for ways to circumvent it. Second, on a long-term basis, what determines the housing price is supply and demand. There are still large numbers of people who do not have a house. Due to urbanization, for a long period of time, many people have been moving into cities. Third, China’s prices are also affected by the monetary policy of the Western countries. Quantitative easing of western currencies will result in an issuance of more RMB to the market, causing an increase in the price of assets.

Source: People’s Daily, May 7, 2013