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Housing price rises set to continue
By Fu Jing (China Daily)
Updated: 2004-08-13 02:38

House prices will continue to rise all over China because of a lack of actual investment in property but a rising purchase potential, the central bank has predicted.

The People's Bank of China (PBOC) warned that a slowdown in property investment is likely to widen the gap between housing supply and demand, therefore prices will rise continuously.

The central bank suggests the government should be extremely concerned about the trend in the real estate market.

Researchers say part of the reason for the rocketing prices is the government's effort to control the red-hot economy.

Lin Yueqin, a researcher with the Chinese Academy of Social Sciences, said that the real estate industry has been the engine driving domestic economic growth in recent years, as well as a sector which has been earning massive profits.

"But as loan frequency, fixed asset investment and the industrial economy have all been slowed down, supply will not meet the demand of the buyers," said Lin. "Thus prices will go up."

A survey on real estate markets in 35 major cities has prompted the National Development and Reform Commission to conclude that China's house sale prices in the second quarter of this year grew by 10.4 per cent year-on-year.

The price level was 2.3 per cent higher than the first quarter this year, and the land price in the second quarter rose 11.5 per cent year-on-year.

Strong purchasing potential has spurred on prices which have been steadily increasing for four years.

Fan Dingyu, a restaurant boss in mountainous Tongjiang County, Sichuan Province, is now considering buying a 100-square-metre apartment in the provincial capital of Chengdu.

Fan, the mother of a primary school pupil, said the house will cost her about 280,000 yuan (US$33,700) -- equal to the amount an average worker would earn in 30 years.

"My husband and I bought the house for two reasons -- investment and for my child's education," said Fan, who plans to send her child to school in Chengdu next year.

Fan is not alone. The Sichuan Provincial Construction Department said about 20 per cent of house buyers in Chengdu are not local residents.

In the second quarter of this year, housing prices in the China's economic hub of Shanghai increased year-on-year by 21.4 per cent, the fastest growth among 35 major cities.

Shanghai has taken the national lead, followed by Ningbo, Tianjin, Nanjing and Chongqing.

Shanghai's increase has already topped those of other cities during the first quarter of this year, achieving a nearly 30 per cent year-on-year increase.

"Housing prices nationwide have risen quickly," said the National Development and Reform Commission.

Commercial house prices topped 5,118 yuan (US$617) per square metre last year, about 24.2 per cent or 1,000 yuan up from the previous year.

Yang Shen, chairman of the China Real Estate Association, said tougher measures should be put in place to ward off risks in China's bullish real estate sector despite housing demands in the country remaining strong.

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