NEW homes in major Chinese cities are overpriced by an average of 30 percent, the Chinese Academy of Social Sciences said in its annual housing report released yesterday.
Tracking the price of new homes in non-prime locations in 35 large and medium-sized cities in September, the academy found that new properties in Fuzhou, Fujian Province, were the most overpriced with a "price-bubble index" of 0.703, followed by Hangzhou in Zhejiang Province and Nanning in the Guangxi Zhuang Autonomous Region, at 0.669 and 0.668 each.
The price-bubble index has a range between 0 and 1. The larger the index, the more the properties are deemed to be overpriced.
The report said that new homes in Shanghai, with a price-bubble index of 0.365, are 36.5 percent overpriced whereas in Beijing, with an index of 0.496, new houses are almost 50 percent more expensive than they should be.
"It remains hard to say whether the CASS conclusions can reflect the real situation across the country because different statistics or different research models always lead to very different conclusions," said Song Huiyong, a research director with Shanghai Centaline Property Consultants Ltd. "We should probably pay more attention to its likely influence on central government's future decision making."
Research reports released by organizations other than the state statistics bureau always offer some different voices and the price-bubble index will at least provide some references to government decision makers that policies to curb property speculations should continue to be enforced in a strict way, Song said.
The report concluded that new homes in seven out of the 35 cities were more than 50 percent overpriced while nine had a price bubble of less than 10 percent.
The high profit margins in China's real estate industry have attracted more companies to tap into the lucrative business, the report said.
Among the 1,300-plus companies listed on the main boards of the Shenzhen and Shanghai stock exchanges, more than 800, or 60 percent, were involved in real estate-related operations.
The gross profit margin for the country's real estate industry stood at 55.7 percent on average in 2009, according to the report.
On Tuesday, the academy released its annual economic report saying that about 85 percent of urban Chinese households couldn't afford new homes because prices were too high, with any increase in wages lagging behind the increase in the cost of a home.
The academy forecast that the average price of new houses in China this year is expected to have risen by 15 percent, compared with 2009's 25 percent.