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Minister rules out property market collapse

By Hu Yuanyuan (China Daily Europe) Updated: 2016-03-20 13:51

China's real estate market will not collapse, as happened in Japan two decades ago, because the situations of the two countries are very different, Chen Zhenggao, the minister of housing and urban-rural development, said on March 15.

"It's not appropriate to compare the real estate market in China with that of Japan in the 1990s, as the two countries are in different stages of economic development and urbanization. We also have different macro policies to control the situation," he said.

Chen's remarks came amid growing concern over the potential risks in China's real estate sector as home prices in Beijing, Shanghai and Shenzhen have surged 20 to 30 percent since the Lunar New Year.

 Minister rules out property market collapse

Minister of Housing and Urban-Rural Development Chen Zhenggao (center) addresses a news conference on March 15 during the NPC annual session. Wang Zhuangfei / China Daily

In Shenzhen, prices have increased 72 percent over the past 12 months, according to the Shenzhen Urban Planning, Land and Resources Commission.

The supply-demand imbalance and the easing of monetary policy are regarded as major reasons for the latest price surges in major cities.

The soaring prices have led to worries that China may repeat what happened in the 1990s in Japan, where the burst of the real estate bubble resulted in an economic recession for almost 20 years.

"Stabilizing home prices in first-tier cities and some second-tier cities is one of our primary tasks. We will take timely, relevant measures, including increasing the supply of land and small and medium-sized apartments, using different policies and cracking down on illegal behavior to push up prices," Chen said.

According to Li Daokui, an economics professor at Tsinghua University, there is no real estate bubble in first-tier cities, based on the price-to-rent ratio. More supply is needed to ease price increases in such cities, Li says.

Yan Yuejin, director of the Shanghai E-House Real Estate Research Center, says the market frenzy in first-tier cities, though a bit unexpected, was fundamentally triggered by the imbalance in supply and demand.

"The international experience sometimes is not applicable to China," Yan says. "For instance, China has more than 3,000 cities, which Japan doesn't have. The situation in China's real estate sector is much more complicated than that in Japan."

Home prices probably will increase further in the long run, he adds.

Chen said he was confident in the future development of China's real estate sector, due to the country's solid economic growth and the potential for urbanization.

China's GDP is expected to grow by 6.5 to 7 percent this year, still much faster than the growth of most economies across the world. The urbanization rate, now at 56.1 percent, will reach 60 percent by the end of the 13th Five-Year Plan (2016-20), indicating strong market demand for housing in the years ahead, he added.

Du Juan contributed to this story.

huyuanyuan@chinadaily.com.cn

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