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China's property market under microscope

By Hu Yuanyuan and Cui Xiaohuo (China Daily)
Updated: 2008-10-17 07:21

The central government is closely monitoring the property market after 18 cities including Shanghai launched various measures to arrest falling property sales, a senior official said Thursday.

Speaking on the sidelines of a press conference in Beijing, Du Ying, vice-minister of the National Development and Reform Commission (NDRC), said: "Real estate is a major sector in our fixed-asset investment, so the government is closely watching its development."

His comments came after the Shanghai municipal government raised by one fifth the mortgage ceiling of the housing accumulation fund, into which employees deposit money every month in return for lower interest rates. The measure took effect on Wednesday.

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"New measures by other cities are exciting news for us," Shanghai vice-mayor Yang Xiong said at the same press conference.

"We will continue to study necessary and controllable policies based on changes in the economy and property market. We aim to keep the property market stable."

Rescue policies aiding the real estate market have been announced in 18 cities.

Favorable offers include raising government funding for homebuyers and extending the time limit for developers to use their acquired land.

The country's property market began to cool in the fourth quarter of last year, with transactions remaining low.

But analysts are reserved on what these moves mean.

Qin Xiaomei, research chief at CB Richard Ellis' Beijing branch, said: "It's hard to say that now is the time the government has to save the real estate market, as there is still room for property prices to fall."

Although property prices in most cities have fallen month-on-month recently, the year-on-year indexes are still going up, Qin said.

According to figures from the NDRC, prices in 70 major cities have climbed 5.3 percent year-on-year, but the growth rate was 1.7 percentage points lower than that for July.

"Meanwhile, developers who grabbed land parcels in 2005 or 2006 are still enjoying good profit margins despite the current price drop. And they should now cut prices to meet consumers' wallets," Qin said.

Many buyers, however, are waiting for prices to fall.

Yin Lijin, a resident of Shanghai's Pudong new district, where the average monthly salary is about 6,000 yuan, said Thursday: "Apartments in my favorite areas still cost more than 20,000 yuan ($2,900) per sq m.

"I'll have to wait until they fall to about 10,000 yuan."

Qian Wei, who together with her fianc in Beijing's Haidan district make 15,000 yuan a month, said: "Friends who are familiar with the market told us the price may be lower early next year."

But agents have disagreed.

"Secondhand apartments haven't dropped much. Owners still want high bids," a salesperson with real estate broker 5i5j said.