House price growth continues to slow
By Su Bei (China Daily)
Updated: 2005-10-21 08:38

Growth in China's housing prices continued to slow in the third quarter, due to the government's macro-control measures.

Spokesman Zheng Jingping of the National Bureau of Statistics said yesterday that average housing prices rose 8.8 per cent year-on-year during the first three quarters of this year.

But prices rose 10.1 per cent in the first half and 12.5 per cent in the first quarter of the year.

Growth in real estate investment also dropped to 22.2 per cent in the first three quarters, from 23.5 per cent in the first half.

"The stable price drop combined with the gradual decline in housing investments, is what the government wants to result from its macro-control," Zheng said.

With an aim to curb speculation and gain control over the red-hot housing sector, the government adopted eight measures, such as introducing taxation policies and stricter control over land supply.

It began to levy a 5 per cent business tax from June 1 on the full amounts received from home sales within two years after purchase.

The People's Bank of China, the central bank, in March also ended the preferential policy for mortgage loans, raising the interest rate on such loans with terms of more than five years by 20 basis points to 5.51 per cent.

Meanwhile, the down payments for home-buyers in cities where the real estate prices rose too fast were raised from 20 per cent to 30 per cent of the total house prices.

The macro-control measures have had a significant impact on people's housing purchases, said Qi Jingmei, a senior economist with the State Information Centre.

Many people believe housing prices would drop and take a wait-and-see attitude towards home purchasing, she said.

According to a third quarter survey by the People's Bank of China, people's willingness to buy private homes was reducing.

The survey found that 19.6 per cent of urban residents had plans to buy private homes in the coming three months.

Implementation of the macro-control measures occurred mainly because housing prices in some cities rose too fast, Zheng said.

"If there are bubbles existing in the sector, they (the bubbles) only appear in some cities and not across the entire country," he said.

The government wanted to ensure healthy development of the real estate industry and not an abrupt decline in both housing prices and investment, he said.

China's housing industry has already become a new growth area for its economic development.

Wang Zhao, a senior researcher with the State Council Development Research Centre, said demand for housing will continue to be strong in the coming years, because people desire to live better lives.

The government should regularize the housing market and implement a unified real estate tax as early as possible, Wang said.

(China Daily 10/21/2005 page10)