Measures to control soaring home prices in first- and second-tier Chinese cities have gained traction, China's top housing official said, dismissing fears that the country might be heading towards a painful boom-and-bust cycle.
At a news conference yesterday, Mr Chen Zhenggao, minister for housing and urban-rural development, said concerns that China was at risk of being caught in a housing bubble similar to Japan's agonising experience in the late 1980s in which its economy sank into stagnation were unwarranted.
"Times are different... (The situation in Japan then) was set against a completely different political and economic backdrop," he said on the sidelines of China's annual parliamentary session. "National conditions are also different... both countries have different levels of urbanisation, economic development and government measures. You can't compare them," Mr Chen added.
He said policies such as increasing land supply and tightening home purchase and financing regulations were already helping to stabilise property prices in bigger cities that had risen "too fast" after the Chinese New Year holiday last month.
Property prices in top hubs such as Beijing, Shanghai and Shenzhen have climbed amid monetary stimulus policies that began in November 2014 and a loosening of home-buying curbs. New-home prices in Shenzhen skyrocketed 52 per cent in January from a year earlier.
But the outlook is far gloomier for property prices in China's smaller cities, which have continued to languish under the weight of unsold inventory. Home inventory nationwide was 739 million sq m at the end of last month, up 15.7 per cent from a year earlier, and widening from 718 million sq m at the end of 2015, Mr Chen said. More than 70 per cent of this empty space is in third- and fourth-tier cities.
This diverging trend between the top- and lower-tier cities poses a problem for the country's housing market policies, he acknowledged.
"The divergence is severe between first-tier cities and those in the third and fourth tiers, and it is worsening," Mr Chen noted. "This brings challenges to our regulation, and remains a huge issue in front of us."
Still, the minister remained upbeat over the longer-term outlook of the property market, pointing to China's sound economic fundamentals - it has set a minimum growth rate of 6.5 per cent from this year through to 2020 - and robust housing demand as more people move from the countryside to cities.
"There is upgrading demand from existing city dwellers... and from new urban residents, the demand is huge. This provides huge potential for the market's future development," Mr Chen said.
Yesterday, the ministry also pledged to crack down on illegal property agency behaviour this year. There are roughly 60,000 of such firms in China.
Vice-minister for housing Lu Kehua said the authorities will strengthen oversight of property agencies abusing their positions as intermediaries in housing transactions. This comes after the central bank's announcement last week that it will clamp down on the illegal practice of property agents offering loans to home buyers to make their down payments.