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Experts warn of lack of construction
Date:2010/5/11      View:1350
 

Lack of construction could push up prices all over again

China's property prices will stabilize in the second quarter of this year due to the government's tightening of real estate policies and attempt to improve imbalances between supply and demand, industry experts said at a forum on Monday.

"In cities that have experienced excessive property price growth, there will be bigger fluctuations in the following three months, but the decrease will differ from city to city," said Nie Meisheng, president of China Real Estate Chamber of Commerce.

However, experts are worried that tightening policies may deter property developers from starting new projects and purchasing land, thereby cutting the supply and pushing up prices next year.

Both central and local governments have launched a string of measures to curb soaring property prices and investment-oriented home purchases, such as raising down-payments and mortgage rates for second and third homes, and even restricting the number of apartments a family can purchase.

Those measures instantly chilled the property market in key cities, with transactions and prices falling. Statistics from the China Index Academy show that among the 35 major cities it monitors, 26 cities saw transactions dip last week, with an average fall of more than 20 percent.

The average price of home deals in the southern city of Shenzhen was 19,271 yuan ($2,823) per square meter, down 25.44 percent from the previous week, leading to the biggest drop among 35 cities.

Beijing was down 18 percent to 15,707 yuan per sq m, and Shanghai was down 12.2 percent to 13,246 yuan per sq m. Hangzhou, capital of East China's Zhejiang province, however, reported a 49.2 percent increase in transactions and 25 percent growth in price, with the average price reaching 25,409 yuan last week.

Ma Ji, consulting manager at Shanghai Centaline China, said the situation in May looks dimmer, as up to 60 percent of their divisions in Shanghai have reached no deals over the past 10 days.

"We still need another two to three months to watch those policies' exact impact on China's property markets. And we should keep a close eye on the land transactions and prices to evaluate property developers' next moves," Nie said.

According to RIECO, a real estate research institute, property investment grew 35.1 percent in the first quarter and the growth rate is up 15 percentage points over the previous quarter. The floor space of newly- started residential projects also jumped by 60.8 percent in the first three months of this year.

"If property developers deter construction or stop buying land to save cash for market uncertainties in the second half of 2010, then the market supply for 2011 will largely shrink, worsening the already poor supply-and-demand relations," said Ren Zhiqiang, chairman of Huayuan Property.

In Beijing, for instance, only around 40,000 apartments are currently available for sale, much lower than the typical 100,000 units for sale, he said.

 
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