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May is the traditional peak season of China's property market,
referred to as "Red May" in the sector.
But the "100 Cities Price Index" shows that housing prices in
one hundred cities dropped for the first time in two years in
May 2014, with price drops in over 60% of the cities.
Beijing's property market also dropped in volume and price.
Has the feared China Real Estate bubble bursting point arrived?
The 100 Cities Price Index by China Index Research Institute
released on May 31 shows that the average price of residential
estate across 100 cities in China was 10,978 yuan per square
meter, down by 0.32% month on month, andyear on year.
This is the first drop after a 23-month continuous increase
from June 2012.
Housing prices of 62 cities dropped, an increase of 17 cities
since April 2014.
Housing prices of 30 cities dropped over 1%,
an increase of 14 cities compared with last month.
In ten large cities such as Beijing and Shanghai, average
residential housing prices, were 19,605 yuan per square
meter, down 0.18%.
House prices of eight major cities fell.
NTD special economic commentator Jiesen Ma said China's
property market trend has changed from continuous increase
in the past decade.
The consensus is that prices will inevitably fall.
Jiesen Ma: "Signs of price, sales and all aspects
show that the turning point has arrived.
The growth is likely to stop. Prices will fall in some areas.
In fact, prices in certain areas already plummeted sharply."
Jiesen Ma said that China's real estate bubble is not even.
Top-tier cities such as Beijing and Shanghai have large
demand, so prices will not drop as fast.
However third and fourth-tier cities will
experience sharp decreases.
According to Central China Real Estate, The new real estate
subscription rates in China's 21 large and medium level cities
were all below 45% in May, compared to 56% in 2013.
From mid-May, sales of China's top 20 real estate firms
was 241.4 billion yuan, only 28.3 % of 2013 yearly sales.
The situation of market leaders in Beijing is not optimistic:
May's new housing sales were 12.4% less than in April,
and a 23.5% decrease from last year if ignoring numbers
for indemnification apartments.
Sales of Beijing's second-hand housing stock declined
9.02% from April and and hit a new low since 2009.
Prices fell by 5.55% compared to April.
More concerning is that the inventory of commercial housing
reached 77,058 units at the end of May, an increase of nearly
22,000 units in three months.
Facing these issues, the Chinese Communists Party (CCP)
rolled out macroeconomic policies in the past two months.
It tries to strengthen the scale of "micro-stimulus," and further
opening up, including the trial policies like "Shanghai-Hong
It also introduced the pilot program to allow ten local
governments to issue bonds, encouraging capital invested
Beijing's Internal Situation Reference lead researcher
Gong Shengli: "This round of adjustments may be most
difficult in China's 36 year economic reform of opening up.
It put in the largest amount of money supply.The U.S.
Quantative easing will end in October, so the international
monetary system will contract.
Another factor is that China's economy is starting to slow."
Gong Shengli pointed out, in Hu and Wen's 10-year regime,
China's economy index grew 230 times.
But it contained too many bubbles.
China's economy quality is the worst among
the G20 countries.
So, the adjustment is imperative.This is also the biggest
challenge in the CCP's history.
Public data shows China's economy growth was 7.7%
The real estate investment accounted for over 15% of GDP.
Real estate contributed to 20% of China's economy last year.
Land revenue accounted for 70% of local finance.
The real estate industry finance also reached 12,200 billion
yuan in 2013, over 70% of the country's finance.
Gong Shengli believes that China's real estate market
will fall by at least 20% in 2014.
Gong Shengli pointed out that if real estate falls over 30%
this year, China will have an economic crisis.
Real estate takes too much money and capital. The economic
crisis in China will also impact other countries.