China's National Bureau of Statistics published on Monday a headline that gave hope to the country which is currently facing its slowest economic growth in a quarter century. The publication ran a news story about a 7.7 percent year-on-year rise in new home prices in December but it didn't mean that the country's housing problem is already over. The headline is but a front to mask the massive amount of unsold apartments in China's smaller cities.
In mega cities, property prices were shooting up fast. In southern Shenzen, prices were up by 47 percent. In Shanghai, prices increased by 15.5 percent and Beijing posted a respectable gain of 8 percent more than a year ago.
However, China still has 13 million vacant homes and according to Wang Jianlin, the richest man in China and chairman of property and entertainment giant Dalian Wanda Group, the Chinese housing market could take four to five years to recover.
"Sales are highly concentrated in first and second-tier cities, where 36 top cities account for three-quarters of the total sales value. So the portion from third and fourth-tier cities is very low. As long as they destock slowly, there is no problem," Jianlin said during the Asia Financial Forum held in Hong Kong.
Industry analysts agree with Jianlin's prediction. They reckon that it will indeed take a long period of time before the price recovery can translate into improvement in property investment.
"Property investment is expected to see a single-digit decline this year despite recovering home prices, so it will continue to weigh on GDP," explained Liao Qun, China Chief Economist at Citic Bank International based in Hong Kong.
Wang Jun, Senior Economist at the China Centre for International Economic Exchanges, also pointed out that the housing crisis in China will have a profound effect on the country's economy as a whole.
He forecasted that "the property market would continue to drag on the broad economy in 2016, with property investment probably showing a weak growth momentum."