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Controversy over real estate market recovery
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16:57, July 14, 2009

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In May 2009, the housing transaction volumes in eight cities, including Shanghai, Beijing, Shenzhen, Nanjing, Wuhan, Hangzhou, Tianjin and Xiamen, increased by 45 to 259 percent year-on-year. The average price has generally increased compared to the previous period, with a maximum increase rate of 11 percent. A turnover of over one trillion yuan indicates that China's real estate market has recovered.

China's real estate market has begun to recover substantially, according to Jing Ulrich, managing director of JPMorgan Chase. He added that real estate construction and sales have stimulated the growth of upstream and downstream industries, and the increase of investment in the real estate industry will be an important benchmark for the sustainability of overall investment growth.

Real estate investment is expected to replace infrastructure construction investment in the second half of 2009 and 2010 to become the new growth point boosting China's economy, predicted Shen Jianguang, deputy general manager of the research department (Hong Kong) of China International Capital Corporation Limited (CICC).

"The current recovery of the real estate market has two major characteristics. Firstly, the demand is transforming into investment demand following the release of rigid demand, which is shown by the increasing transaction volumes of new houses and villas while second-hand house transactions declined. Secondly, developers and suppliers are reducing their inventories faster than expected. Therefore, the recovery of the real estate market is not a weak and temporary rebound, but a sign of a new round of boom," said Zhong Wei, a professor from the Finance Research Center at Beijing Normal University.

However, there are different opinions. Judging from the overall situation, it is still a rebound following an excessive real estate market recession in 2008. It is a result of the release of rigid demand and the market's self-adjustment, and thus cannot be deemed a sign of recovery, according to Yi Xianrong, a research fellow at the finance research institute under the Chinese Academy of Social Sciences (CASS).

Vice President Zhu Yongmin of Shanghai Shengji Group, also said that the following three important indices must be considered when judging the recovery of the real estate industry: first, the overall recovery of the global economy and the continuous increase of consumers' purchasing power; second, the continuous increase of land transaction volumes and the reduction of land stock; third, the relative stability between real estate transaction volumes and prices within a certain period of time.

"We cannot use indices in peak sales seasons as a basis for a forecast," he added.

By People's Daily Online

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