The State Council announced on Wednesday that China's limited development strategy for real estate encourages the supply of economical apartments but curbs the construction of luxury houses and villas.

The central government also decided to strengthen its monitoring of the country's real estate market by improving management of planning, controlling the supply of land to developers and setting up a national housing market alarm system.

The government made the decisions after the Ministry of Construction presented a report to the executive meeting of the State Council, which was convened to discuss the development of the real estate market and re-employment.

The ministry said the "overall condition of China's real estate sector is healthy," even though several cities risk facing too much investment and excessively high housing prices.

Experts said the govern-ment's measures are essential to sustain the development of China's fledgling real estate sector.

After several months of intensive research, the central government has recently decided to invest 324.1 billion yuan (US$39 billion) for the construction of affordable housing during the 2003-04 period for middle- and low-income families.

"To meet the demands of middle- and low-income families should be our top priority," said Qin Hong, deputy director with the Policy Research Centre under the Ministry of Construction.

The country's housing supply is not balanced as there are insufficient numbers of regular commercial apartments, but there is a surplus of luxury condominiums and villas, said Qin.

In Beijing, only about 10 per cent of the housing projects are priced below 4,000 yuan (US$480) per square metre. In Shanghai, only 18 per cent of the real estate projects are below 3,500 yuan (US$420) per square metre and in East China's Hangzhou, only 3.7 per cent of those dwellings are priced below 3,000 yuan (US$360) per square metre.

However, the national average housing price is still climbing, gaining a 5 per cent year-on-year increase during the second quarter of this year, and home sales rose to 155 billion yuan (US$18.7 billion) in the same period, a year-on-year increase of 47.2 per cent, according to an official surnamed Zhang from the National Development and Reform Commission.

For the first half of 2003, the government has kept vigilant in efforts to regulate the real estate market, and unveiled a new mortgage policy to ensure the sector's healthy development.

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