China's housing prices expect slight dip in Q4: think tank

20:10, November 16, 2009      

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Housing prices in China are expected to fall slightly in the fourth quarter of this year as price hikes and reduced lending may curb property purchases, the nation's top think tank said in a report issued Monday.

The volume of property sales may decline in the fourth quarter, but investment in the real estate market will keep growing, the Chinese Academy of Social Sciences (CASS) said in the report.

The report did not distinguish between new homes and second-hand ones.

October saw property prices in 70 medium-sized and large Chinese cities rise 3.9 percent from a year earlier and 0.7 percent from September, according to data from the National Bureau of Statistics last week.

New home prices climbed 0.9 percent from September, 0.1 percentage points higher than the growth rate in September. However, the growth rate of second-hand house prices eased in October. Second-hand home prices rose 0.4 percent month-on-month in October, but the growth rate was 0.1 percentage points down from that in September.

Prices of second-hand houses in some major cities started to fall. For instance, the average price of second-hand houses in Beijing stood at 11,920 yuan (1,745.6 U.S. dollars) per square meter in October, down 1.65 percent from September, according to the municipal bureau of statistics.

Housing prices rebounded in March on expanded lending and the government's favorable policies to stimulate property consumption, including tax breaks and interest rates cuts.

Chinese banks extended 8.92 trillion yuan of loans in the first10 months, 5.26 trillion yuan more than the same period of last year, after the government scraped lending restrictions for banks last year to accelerate investment.

However, the record lending triggered concerns of assets bubbles and pushed up housing prices beyond the level of affordability for many.

Speculation was the main reason behind the current price hikes, said the report.

The real problem was that financial institutions did not strictly implement the government's favorable policies, which spurred excessive demand and speculation, said Ni Pengfei, researcher with the Institute of Finance and Trade Economics of the CASS.

The government has not adopted forceful measures to curb speculation and may take further steps to spur housing consumption as the economic recovery was still largely dependent on property market, said the report.

Government data showed that the country's real estate sector accounted for more than 20 percent of urban fixed-asset investments, a key driver of China's economic recovery.

The report forecast that property prices would stabilize in the first quarter of 2010, rise on expectations of inflation in the second quarter, and stabilize or slightly dip in the third and fourth quarters.

The property market was not likely to see drastic increases in supply or promotions with discounts in the short term as property developers had sufficient funds at hand because of the moderately loose monetary policy and earnings from sales this year, the report said.

The country's property developers have reaped impressive sales revenue on rising prices. China Vanke Co., the country's largest property developer by market value, posted a 35.2 percent jump from a year ago in sales revenue to 52.69 billion yuan in the first 10 months.

China was also expected to face rising expectations of inflation in the first two months of 2010, which will further boost the property market, Ni Pengfei said.

Historical data also showed that credit in the first quarter usually accounted for more than 60 percent of the year's total.

Source: Xinhua
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