BEIJING—A real estate frenzy grips China's urban areas, and one recent day saleswoman Xu Shuang faced an unruly throng when units at her luxury housing project went on the block.
"You should have seen it. ... More than 1,000 people gathered outside," Xu said.
Amid flying elbows and chaos, the sales crew set up a lottery system to attend to customers, letting in a handful at a time. Many signed purchase agreements for anything put before them.
"It was kind of chaotic," Xu said. "People selected their apartments in a great hurry. They didn't give much thought to the floor or the location."
China's sizzling real estate market is anything but normal and orderly. Hordes of buyers often flood showrooms when new properties hit the market, eager to throw down cash. Pent-up demand, rising incomes and a paucity of affordable housing have driven prices up sharply in major cities, leaving some middle-class buyers feeling squeezed out and angry.
Real estate development is a crucial driver in the economic growth that underpins the legitimacy of the government. Local officials control land supplies, chasing profits for local coffers and bribes for themselves, allowing land hoarding to occur.
The government, fearing overheating in real estate, has sought to cool the market. In late May, it boosted the required minimum down payment for larger housing, imposed new taxes to prevent resales within five years and took measures to increase construction of low-cost housing.
"Real estate prices right now are very high, sometimes unreasonably high," said Yi Xianrong, director of the Financial Institute of the Chinese Academy of Social Sciences, a major think tank. "In Shanghai, in a year and a half, average prices have increased threefold. And it's not just big cities like Beijing, Shanghai and Guangzhou, but also secondary cities like Zhengzhou."
The frothy market generates passions, worrying government officials. Last month, it shut down the Web site of an activist who launched a "Don't Buy a House" petition drive. Activist Zou Tao claims that urban dwellers are turning into "mortgage slaves" yoked to debts for decades.
Before housing reform in the 1990s, most urban Chinese lived with their extended families in tiny, deteriorated units assigned by their workplaces.
"Incomes have risen a lot. Across China, incomes have risen 50 percent over the past five years," said Anna Kalifa, head of research in the Beijing office of Jones Lang Lasalle, a global real estate services firm.
Reforms facilitating property sales don't date back far. In 1998, the government allowed banks to introduce mortgages. Since then, bank lending to developers has soared. Lists of China's richest tycoons always include numerous real estate developers.
The real estate frenzy first hit Shanghai, the booming coastal financial hub with thousands of new residential and commercial high-rises, in autumn 2004 and spring 2005.
It has since cooled there, as the local government quashed speculative buying in which investors churned apartments, selling them at high profits even before construction was complete. But the mania swept to other cities.
"Many treat the housing industry as a `super casino' and are eager to profit from it," Wang Xiaoguang, a researcher for the State Development and Reform Commission, wrote recently in the China Daily newspaper.
Feeding the frenzy is the lack of investment opportunities elsewhere in the economy. Stock markets are thinly traded, and banks offer low interest on savings.
"If you are wealthy in China, and you are not that sophisticated in your investments, real estate is basically easy to understand," Kalifa said.
Buyers retain bulletproof optimism that values will only go up.
"It's impossible for them to go down. Many people need better housing," said Lu Ting, a saleswoman at Twin Butterfly, a massive housing complex in southwest Beijing.
Getting solid information on China's property market is no easy task. Everyone seems to have a vested interest, including Chinese newspapers, which rely more heavily on property ad revenue than in other countries. Local governments hype property growth, citing it as a factor in their development, while national officials downplay it, fearful of overheating.
As an example, Beijing reported real estate price increases of 19.2 percent in 2005, and 17 percent in the first quarter alone of this year. Other cities reporting sizzling markets include Shenzhen and Dalian, both hotspots for Japanese and Korean investment.
The National Bureau of Statistics, meanwhile, said property prices in 70 large- and medium-sized Chinese cities rose only 5.6 percent in the year ending in April.
"These official statistics are not reliable," said Yi, the scholar. "There's a big bubble. All across the country, there is a bubble."
Nationwide cooling measures, such as the move last month to boost the minimum down payment on housing of more than 970 square feet (considered "luxury") from 20 percent to 30 percent, may have little impact.
"Our customers don't care if they have to pay 10 percent more," said Xu, the saleswoman who works at a high-end southeast Beijing development.
The big-spending buyers come from other provinces, including poor Shanxi province, where they operate perilous coal mines that are virtual death pits for laborers.
On the far eastern outskirts of Beijing, where middle-class residential high-rises are going up, Yang Jun, a 33-year-old from Inner Mongolia, waited outdoors for his turn to make an offer on an apartment at a new complex, called Sunshine in New City.
"There were about 200 people when I arrived here this morning," Yang said. "People were scrambling to buy."
(c) 2006, Knight Ridder/Tribune Information Services.
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