In spite of the government’s push to bring prices under control, Chinese real-estate market remains a beast hard to tame, with the house prices keeping stubbornly high.
While the current scenario might sponsor a short-term economic growth, it elevates the risk of a destabilizing decline in prices down the line.
Take the house price in April, for instance. This year they rose 4.3% comparatively to the previous year, and this after having already gained 3.1% in March, according to the Wall Street Journal, who plotted these numbers based on official data released Saturday on price changes in 70 Chinese cities.
On a monthly basis, Chinese home prices increased 0.9% in April, compared with a 1% increase in March, the WSJ claim.
This situation could undo the government's efforts to bring the sector under control and to improve affordability for first-time home buyers.
According to The New York Times, prices that rise out of line with income reflect demand from speculators and are difficult to sustain. Such a burst of activity could come at the cost of a sharper correction in the future if a speculative bubble bursts and prices adjust down to levels average households can afford.
"While there has been some moderation in April, there are still many cities with rising prices," Liu Jianwei, an official with China's National Bureau of Statistics, stated. "Expectations that prices will continue to rise haven't been eliminated."
Late April, researcher at the Chinese Academy of Social Sciences published a study that warned that China's real-estate sector is already out of balance. “The government,” the authors pointed in the report, “needs to implement changes and enforce curbs on the market, otherwise there could be an overall loss in control of property prices."
What is driving the upward swing in home values is an increase in lending that started in the second half of 2012 and extended into the first four months of 2013.
