Real estate sector needs self-regulation

Mao Daqing, Executive Vice-President of a real estate developer China Vanke Co Ltd discusses the "chilly winter" sweeping over China's real estate market and its future on Beijing TV's talk show "Yang Lan One on One". [Provided to chinadaily.com.cn]

Mao Daqing, Executive Vice-President of a real estate developer China Vanke Co Ltd discusses the "chilly winter" sweeping over China's real estate market and its future on Beijing TV's talk show "Yang Lan One on One".

Yang Lan: In May We saw housing prices decline in some cities such as Shanghai and Shenzhen. How do you interpret this?

Mao Daqing: I would describe it as an indigestive condition.

Yang: Indigestive? Did it swallow more than it could chew?

Mao: It is a fullness of the market. In the past three years, after the government's strong regulation of housing policy, some cities that were less regulated began attracting huge investments. And governments there started actively selling land that resulted in over-supply.

In other big cities that had hot real estate markets, such as Beijing, investors thought that there was no risk in real estate investments. No mater how high the prices were, a "rigid demand" will always be there.

But some people still claim it is "rigid demand" even when prices reach 80,000 yuan ($12,890) per square meter. What is this "rigid demand"? Sometimes I don't understand it. This demand doesn't represent those in low middle income; it means real estate in big cities can be easily acquired at any price.

In past 15 years, according to my knowledge, 70 percent of people who have most purchasing power were born in 1964, 1965, and 1973. Although these middle-aged people are less rigid when it comes to extra housing because of their economic stability, they need to take care of their children's (born in 1980s and 1990s) requirements.

And this has brings up the problem of "mother-in-law pushing up housing prices". They buy houses for their children in panic (most Chinese parents are afraid that their children will not get married without a new house).

China is facing the problem of largest aging population in the world. We did a calculation last year and found that there will be more than 400 million 60 year olds by around 2030. And the real estate demand must fall as the rigid requirement decreases gradually.

There will always be a demand, but don't expect the prices to increase endlessly.