Slowdown Looks Unlikely In China

Source : The Business Times, April 29, 2008

Urbanisation, desire for better housing will put pressure on prices: think tank

(BEIJING) China's real estate market will not see a major slowdown in 2008 despite Beijing's intensified efforts to cool excessive price rises, the top government think-tank said in a report published yesterday.

Still going up: Inflows of speculative capital from overseas would increase during the first half of the year, says think tank

Urban property prices rose less rapidly in March than in the first two months, and the property outlook index, which covers price and investment trends, continued to decline in March after peaking in November.

But the Chinese Academy of Social Sciences (CASS) said that it was still premature to draw the conclusion that the market was heading south.

'Although transaction volumes have been declining in some cities since 2007 and more buyers are now waiting on the sidelines, that does not necessarily indicate the approach of a turning point,' it said in a report summarised by the official China Securities Journal.

China's urbanisation and residents' desire for better housing, compounded by the scarcity of land and the government's tightened grip on land supply to curb investment, would put continued pressure on prices in the long run, it said.

The National Development and Reform Commission, China's top economic planner, also said recently that upward pressure on property prices would increase in the second quarter as more people put their money in property to avoid the erosion of returns faced by bank deposits.

CASS said that inflows of speculative capital from overseas would increase during the remainder of the first half of the year, as investors sought shelter from global economic turbulence and bet on continuing appreciation of the yuan.

To brake increases in property prices, Beijing would continue its tightening campaign, including by curbing land supply and loan growth and giving further policy incentives aimed at increasing the supply of more affordable housing, it said.

CASS said the government also needed to curb the hoarding of land by developers, raise the downpayment requirement for second homes, which is currently 40 per cent, and start to levy a general property tax. -- Reuters