Inspite of rumors and expectations in the last two months that China is going to soften the tightening measures amid weak economic data, the central government has repeatedly announced that its determination to curb property speculation has never changed. In China, political factors are often more influential than economic factors and the following survey results by Bank of China may explain to some extent why China is so determined to curb property speculation.

According to the survey in 50 cities by Bank of China in late May, Income Sentiment Index fell by 1.1 percentage point to 49.5% in the second quarter versus the first quarter, and put an end to the previous three quarters’ rising streak. The survey shows Price Satisfaction Index dropped 4.2% to a historical low at 21.7% from the previous quarter, while 58.9%, a new high in ten years, of the urban residents found the prices “high and unacceptable”.

The survey also reveals 72.5% of the residents, the highest rating since the second quarter of 2009, thought the present home prices “are too high and unacceptable”. In the second quarter, only 30% of the residents expected the home price to rise, which was a 10 percentage-point drop from the first quarter’s 40%. The desire to purchase a home unit had fallen two quarters in a row by 3 percentage points to 15.5%, breaking the rising streaks since 2009.

The Chinese people’s general dissatisfaction of high home prices in China is an important political factor in the Central Government’s determination to curb property speculation and reduce home prices, beside the economic factors of over borrowing by municipal governments and bank credit crisis due to property speculation.

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