Since August 2012, house prices in 69 of 70 Chinese cities have risen an average of 7.5%, leading to fears of a housing bubble in the Middle Kingdom. Higher prices are encouraging more development, and prime property in Beijing and Shanghai is selling for record prices.

At the same time that prices are jumping in some cities, the country is plagued with “ghost cities” like Jing Jin City, just an hour east of Beijing, where 3,000 villas and other high-end amenities go begging for residents. And there are more ghost cities spread all over the country.

Earlier this year, Shanghai’s local government ordered banks to stop making loans for purchases of third homes. In Beijing, the government limited single residents to a single home. Both cities said that a 20% capital gains tax on profits from property sales would be strictly enforced.

The deputy director of the country’s Ministry of Housing and Urban-Rural Development has said that 80% of home purchasers are first-time buyers who want to improve their living conditions, not investors looking to flip homes for a profit. The central government denies that a bubble is developing, despite some regional issues.

A real estate researcher estimates that, based on the record sales prices for land in Beijing and Shanghai, housing prices will rise 50% in a year. Another researcher recently told China Daily, “It is the combination of local governments, companies and banks taking advantage of the higher prices that contributes to skyrocketing prices.”

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.