DTZ says China property market faces land shortage

SYDNEY: China could struggle to keep a lid on its property market as urbanisation piles pressure on the major coastal cities, making land scarcer and driving up prices, an executive of international real estate consultancy DTZ said.

"The speed of urbanisation is very, very fast, which means that they are running out of land," DTZ Asia Pacific Chairman Leung Chun-ying told Reuters on the sidelines of a conference.

"Cities such as Shanghai, Shenzhen, Dongguan, Guangdong, these are the cities of south, they are now all grey on the google satellite map."

Leung said the long-term constraint on supply of new land for development overshadowed some of the shorter-term demand problems, such as a lengthy and inefficent buying process.

The Chinese government has rolled out a slew of measures to tame rapid rises in property prices since April, including higher downpayments and mortgage rates for second homes.

There is also now media speculation Beijing will impose a property tax soon.

But Leung said that in addition to increasing urbanisation, increasingly wealthy Chinese were trading up to bigger homes.

"We are talking about 30%, 40%, 50% increases in salaries a year," he said.

Home prices in some of the Chinese cities went up as much as 30% last year and the sizzling property market has created concerns about a potential crash in the market.

But Leung does not see a crash, saying that if speculators left the market, real demand would take up the slack.

"Demand catches up very quickly," he added, noting that fast economic growth had also helped to improve home affordability.

He also noted that tight government control of capital inflows and outflows contributed to a stable property market.

"Capital, including bank lending, cannot leave this crust in mainland China and go back to say Japan, Hong Kong or Singapore quickly, because it's a closed system," he said.

"Banks are also more tolerant because most of the banks are ultimately owned by the state, and the state does not want to see the market collapse," he added.

The ruling Communist Party has identified rising property prices as a threat to social stability as more and more people are priced out of the housing market.

This month, it said it would intensify efforts to draw factories inland from crowded coastal regions. -- Reuters