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House prices, pain and gain

(China Daily)

15:06, November 08, 2011

BEIJING, Nov. 8 (Xinhuanet) -- The nationwide fall in the price of new houses that began recently does not mark the end of China's efforts to stave off a real estate bubble. Rather, it is only the beginning of the end.

To effectively prevent a property bubble from crippling the growth of the world's second largest economy, Chinese policymakers must brace for the loud complaints and pressures that falling house prices will inevitably invite.

It is reassuring to know that Premier Wen Jiabao on Sunday pledged the government will not be swayed from the tightening measures introduced to cool the property market.

Still, no one should underestimate the potential backlash that may follow the decline in property prices.

Average home prices in the country's 100 major cities fell for the second consecutive month in October to 8,856 yuan ($1,400) per square meter, down 0.23 percent from September, according to the latest report from the China Index Academy.

And price cuts in first-tier cities like Beijing and Shanghai are so much sharper that some property developers were even reported to be facing strong protests from existing homeowners.

After months of drastically shrinking house sales, the ongoing competition among real estate developers to cut prices is a clear sign that the government's measures to deflate the property bubble are bearing considerable fruit.

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