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Caution should be rule of realty game

(China Daily)
Updated: 2010-02-11 07:55

The US media say a Chinese couple bought Michael Jackson's luxury house in Las Vegas for $3.1 million (21.2 million yuan). Compared with the price of Jackson's house, China's housing price is unbelievably high. And hence, China should recognize the risk in the real estate industry, says an article in Xinhuanet. Excerpts:

The house of deceased pop star Michael Jackson was sold for 3.1 million dollars (around 21.2 million yuan). The price comes to only 14,000 yuan per sq m. That is much cheaper than Chinese houses. In January, housing prices stayed between 17,000 and 19,000 yuan per sq m in areas beyond the Fifth Ring Road in Beijing.

The region around the Fourth Ring Road has already exceeded 45,000 yuan per square meter. Even in Hainan province, housing prices have doubled in a week following the government's announcement of launching a tourist project.

Compared with Jackson's house, China's housing price is unbelievably high. Worse still, Chinese people are not as rich as the Americans. In this context, however, some people seem just cannot get enough.

A few days ago, a Hainan official said: "The top price for a top-level house in Hainan should run into 270,000 yuan per sq m". Thanks to these people the real-estate bubble in the country is swelling to the edge of risk.

Three major forces are driving the housing price up. The first are the average citizens whose ultimate goal of earning money is to buy a house. The second are local governments, which use realty business to generate as much profit as possible. The third are banks, which make profits from housing loans.

Now that housing prices in China have crossed that of the US, it is time for all three parties to be alert to the risk of the country's realty market.

(China Daily 02/11/2010 page9)