(China Daily)
Updated: 2007-07-27 09:23

Speculation is one of major reasons for the soaring property prices in some medium and small-sized cities, says an article in the Jinan Times. The following is an excerpt:

Property prices in many medium and small-sized cities are rocketing. And for several months in succession, Beihai, in the Guangxi Zhuang Autonomous Region, has seen its prices rising fastest of all among the 70 cities currently being monitored by Chinese authorities.

In cities where prices are rising fastest, speculation has been seen to be a key propeller. Starting late last year, the number of non-local house-buyers began to jump in Beihai. Between January and June, non-locals bought 59.3 percent of the available stock in the city, and 67.9 percent in June alone.

According to an insider, several buyers snapped up 10 or more properties at a time, a clear sign of short-term speculation.

Buying for short-term gain is driving up prices nationwide and there are now quite a number of full-time property speculators making their living in this way.

Some invest their own money, while others partner developers, or borrow from pawnshops and financial management companies. They then create a hype to push up prices and sell on to unsuspecting newcomers.

Such escalating prices can wreak havoc in smaller cities, far more so than in larger ones. Small cities are at risk of being "kidnapped" by speculators because they don't have the financial muscle to compete.

Another problem, of course, is that inflated prices make it near impossible for first-time buyers to get on the property ladder.

Medium and small-size cities must therefore take measures to rein in the speculators and also expedite the construction of subsidized and low-rent housing for the less well-off members of their communities.