A top city official has declared Shanghai's property market as overheated amid the rising home prices.
As per Bloomberg's report, Communist Party chief, Han Zheng, said, "An irrational and overheated sentiment have emerged in the Shanghai real estate market, and these sentiments have raised home prices."
The statement was made during last Sunday's annual legislative meetings in Beijing. In line with the overheating in Shanghai, Han said the property market needs to be more controlled and so the regulations in the city will be strengthened by introducing measures that are "scientific as housing is a specialty commodity."
Top-tier cities in the China - Beijing, Shanghai, Guangzhou and Shenzhen -- saw home prices rise, while other major cities experienced lower prices, according to Nikkei Asian Review. In Shanghai, prices of new homes rose 21.4 percent in January, its fastest pace since 2013. Shenzhen recorded the highest gain in home prices with an eye-watering 52.7 percent while in Beijing, house prices climbed 11.3 percent.
These increases resulted in panic buying. Reports say homebuyers had to fall in line outside offices of real estate agents to a point that police had to be called in to clear the roads. In Shenzhen, 90 percent of homes are sold immediately after being listed, with buyers seemingly ignoring important details of the properties such as layout before making a purchase. Consequently, mortgage rates rose to an average of 9,000 yuan ($1,381) per month, Nikkei Asian Review said.
These events in the property market prompted city officials to issue briefings and calm the demand in hopes to prevent a housing bubble. Plans include increasing the supply of houses, making stricter regulations and curbing price increases.
Additionally, other regions in the country experiencing the opposite situation from the top-tier cities are also placing strategies to drive demand, bolster home prices and reduce inventory.