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House Price Rises Slow Down

07-14 17:56 Caijing Magazine

Property advisors predict that China's housing price-to-income ratio will return to a reasonable level by 2011.

By intern reporter Wang Su and staff reporter Zhang Yingguang

In the first half of this year, housing sales in ten major Chinese cities dropped 41 percent from 2007, according to statistics provided by property advisor DTZ, and the growth rates of housing prices in these cities have begun to slow down.

A DTZ report shows that the average housing prices in ten cities, including Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, Chengdu, Xiamen, Shenyan, Wuhan and Changshah, have risen 10 percent year-on-year since 2008 began. On the other hand, housing prices in Shenzhen and Xiamen dropped by 31 percent and 6 percent year-on-year, respectively.

However, DTZ’s study shows that China’s housing price-to-income ratio, an important index for the housing market, is still dangerously high.

Housing sales in China have seen nation-wide drops since January. Forced by a tight capital chain and government credit control, developers began to lower their prices hoping to boost sales.

According to the National Statistics Bureau, Beijing has witnessed slowing growth in housing prices since the beginning of the year. In May, housing prices in Beijing rose 12.4 percent year-on-year, which is 0.6 percent lower than the growth rate in April.

Statistics show that Beijing’s property market has been oversupplied for the first time since 2005. New additional housing space added to the market amounted to five million square meters, while sales have reached 3.5 million square meters in the first five months.

DTZ said the recent sluggish performance of property market is a short-term response to the government’s controlling measures implemented on the industry.

China will raise the deposit reserve ratio to 20 percent by the end of 2008, if DTZ predictions are correct. Bank loans in the property industry will also fall 300 billion yuan from last year’s sum to 880 billion yuan this year, said DTZ’s Jiang Shangli.

Moreover, the government issued new rules to further regulate idled land held by developers. Jiang expects these policies to increase the housing supply and put pressure on real estate prices, which will help sales.

DTZ predicted that with an increase in resident income and a reduction in housing price growth, China’s housing price-to-income ratio will return to a reasonable level by 2011. But DTZ dismissed these speculations on account of the dramatic slump in real estate prices.

However, some experts also expressed concerns about the market. Wen Tianna, general manager of BOCOM International said he doesn’t expect the government to loosen the rules on real estate financing any time soon, and in addition, the market outlook for the third quarter is not optimistic.

Huang Xiong, president of Centaline Property Agency, also said that if the sluggish market performance continues, some developers will face financial crises.

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