What bubble? Experts say extreme distortions in supply-demand are driving up home prices in Beijing and Shanghai
New land supply in the capital is equivalent 12,200 units, compared with 95,000 sold so far this year
Beyond all the talk of cooling down the credit-driven housing bubble in China, experts say the situation in the nation’s largest cities still comes down to basic supply-and-demand mathematics.
Beijing and Shanghai, cities which have seen a massive population influx, exhibit the biggest distortion in terms of supply and demand for urban land, according to official data.
“The strong home-price rally is by no means a national phenomenon. Instead of thinking of the whole market as a big bubble, it is more accurate to view it as a supply-demand mismatch,” said Larry Hu, head of China economics for Macquarie Securities.
Beijing’s land supply allocation for this year is 4,100 hectares, of which 1,200 hectares is designated for residential use, according to the city’s urban land supply plan published in April. The 4,100 hectare quota itself has been declining for six consecutive years.
Even so, year to date Beijing’s government has only sold 10 parcels, or 108 hectares of land, according to data compiled by China Index Academy.
Excluding subsidised homes and ancillary properties, actual land area available for private homes is 44 hectares, which converts to roughly 12,200 new homes, compared to 94,921 new home sales in the same period in the city, according to fangdd.com.
The huge gap means Beijing is doomed to fail in reaching its annual target, analysts said. A review of the implementation reports issued by the city since 2011 show that except for 2013, Beijing failed to meet its residential land supply targets every year.
