Sep 30, 2010
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China could find it hard to control the real estate market as urbanisation continues to put pressure on main coastal cities, driving up prices and making land scarcer, said a DTZ executive.

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

The long-term constraint on new land supply for development has overshadowed some shorter-term demand problems like inefficient and lengthy buying process, said Mr. Leung.

The government has introduced a set of measures aimed at moderating rapid property price increases since April, which include higher mortgage rates and down payments for second homes.
Speculation has also emerged that Beijing will soon introduce property tax, but Mr. Leung said that aside from increasing urbanisation, there are a growing  number of affluent Chinese who are trading up to larger homes.  
"We are talking about 30 percent, 40 percent, 50 percent increases in salaries a year,” said Mr. Leung.

Some Chinese cities saw up to 30 percent increase in home prices, and the red-hot real estate market has led to concerns of a potential crash in the market.

However, Mr. Leung said a market crash is unlikely, adding that real demand would take up the slack once speculators left the property market.

“Demand catches up very quickly,” said Mr. Leung, who also noted that the fast economic progress had helped improve home affordability.

The stable property market was also due to the government’s tight control over capital inflows and outflows, he noted.

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