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Housing construction is increasing again

(China Daily/Agencies)
Updated: 2009-09-07 08:06

Up or down?

The government can take heart in how most of the real estate money has been spent to date.

Investment in property construction was up one-fifth in western China - the part of the country with the biggest need for new housing - in June compared with a year earlier.

Wealthier coastal areas in the east, which are already heavily built up, reported a 4.4 percent rise.

But officials are wary of another boom in housing prices paving the way for yet another bust.

A handful of Chinese cities have made mortgage-lending terms on second homes stricter to try to keep speculators at bay.

Several real estate agents said the market seemed to have cooled over the past few weeks.

Special Coverage: Housing in China Related readings:  HK interest in mainland housing market goes up  Construction idled on Guangzhou housing land  Analysts refute home loan worries, stress stable home prices  Beijing's commercial property woes

Shanghai Xinyi, a real estate agency in China's financial center, said transactions in August fell by half from July.

A salesman surnamed Luo at a Shenzhen branch of Centaline China confirmed that business has slowed down from its brisk pace in the first half.

"It was not rare for house sellers to cancel their original contracts and lift their asking price, even if it meant paying a penalty," he said by phone.

"But the momentum weakened in August. We could feel the effect of the government's tightening-up of loans for second homes," he said.

Dong Tao, an economist with Credit Suisse in Hong Kong, offered another explanation of the drop in transactions.

Soaring demand gobbled up whatever homes were on the market, so developers simply must build more, he said in a research note. But it takes time to buy land and obtain approvals.

"After many sites have passed the paperwork phase, we expect housing construction to rise significantly over the summer time," Dong said.

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