China's housing prices expected to drop, but not sharply, in second quarter

15:10, April 07, 2011      

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China's housing prices are expected to decline in the second quarter after some major cities experienced price slumps in March, experts say.

In March, major Chinese cities, including Beijing, Shanghai, Guangzhou and Shenzhen, watched as housing prices dropped. Shanghai had the widest range of decline, down 7.6 percent, according to statistics from China Real Estate Index System (CREIS).

In Beijing, real estate trading volume decreased 40 percent in the first quarter from the previous quarter, hitting its lowest level in three years.

Moreover, real estate trading volume in 80 percent of the 30 cities monitored was lower this March compared to the same time last year, according to the CREIS.

Some industry insiders say that a turning point for housing prices is likely to occur in the second quarter, but others say a sharp price decline can not be estimated now.

Zhu Zhongyi, vice secretary-general of the China Real Estate Association, told Xinhua that a modest decline in the cost of housing is likely to happen in the second quarter, adding that a sharp drop is not quite possible.

"I don't think the word 'turning point' is appropriate to describe future housing prices," said Zhu.

He said housing prices depend on many factors, including location, and prices can vary between places.

Zhu mentioned that the current austere policies could trigger housing price promotions, but it remains difficult for local governments to be fully independent of financial revenue from land.

It is better to resort to market regulation to control the housing industry, said Zhu.

The People's Bank of China, the country's central bank, on Tuesday announced an interest rate hike of 25 basis points beginning Wednesday, part of an intensified effort to fight inflation and asset bubbles.

This was the second time the central bank raised the benchmark interest rate this year and the fourth increase since the start of 2010.

Housing prices have been climbing quickly since mid-2009. Record numbers of loans and tax breaks have resulted in prices that are too high for average Chinese people to afford.

The Chinese government began creating new policies to combat these increases around the beginning of 2010. These newly issued policies include higher requirements for down payments, mortgage rates and new purchases.

Source: Xinhua
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