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CREA: housing price hike increases pressure amid weak market supply
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16:44, August 17, 2009

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With the continuing recovery of the economic environment, China's real estate market is also expected to continue to recover steadily. However, the foundation for recovery is not stable and whether demand is sustainable remains to be seen. In addition, market supply is clearly insufficient and some cities are facing increased pressure from rising housing prices, said Zhu Zhongyi, vice chairman and secretary-general of the China Real Estate Association (CREA).

In cities where housing prices are rising too quickly, many ordinary housing buyers who have residential or improvement demand are taking a wait-and-see attitude. In July, the volume of housing transactions in some cities declined to varying extents. Some cities tightened policies for buying second homes, which has actively restrained the increase in investment demand and the rise in housing prices. But residents in these cities still have relatively high expectations of preserving and appreciating housing value. Potential demand still exists.

The supply situation is not optimistic. Between January and July, total investment in real estate development increased by 11.6 percent year-on-year and investment in residential housing development increased by 8.2 percent year-on-year. The amount of land purchased, developed and land on which construction newly started dropped by 25.8 percent, 13.4 percent and 9.1 percent year-on-year respectively.

In cities with relatively high sales volume in particular, investment in residential housing continued to drop year-on-year between January and July. For example, sales volumes in Beijing, Shanghai and Guangdong fell by 10.5 percent, 6.2 percent and 13.8 percent respectively.

According to the results of monitoring by relevant agencies in Shanghai, Hangzhou, Shenzhen and other cities, judging by the average sales rate in the past six months, areas of the saleable housing in Shanghai and Hangzhou can only meet demand for another two to four months; and in Shenzhen for another six months. Therefore, market supply is clearly insufficient.

The background of this supply and demand situation is coupled with an easing of funding pressure for development enterprises, which therefore have no incentive to promote sales at a lower price. Comprehensive analysis shows that these cities will continue to face the increased pressure of rising housing prices in the near future, however the price increases will slow down and fluctuations in transaction volume may emerge.

By People's Daily Online

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