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Searching for a turning point in China's property market

07-15-2010 08:31 BJT

by Xinhua writer Wang Yaguang

BEIJING, July 14 (Xinhua) -- Fresh from his success at predicting World Cup results, German octopus Paul might try turning his powers of foresight to unraveling the speculation surrounding China's property market.

The issue has almost as many conflicting interests as Paul has tentacles -- and the tangle is proving difficult to unwind.

Market rumors swirl about whether the government will continue its tough stance on the property market; property developers see falling sales; home-buyers hold on to their money expecting prices to go down; and how will it all affect the national economy?

In June, average housing prices in 70 major Chinese cities fell by 0.1 percent from May, according to the National Bureau of Statistics.

The annual growth of property prices in the cities slowed for the second month, from 12.8 percent in April, to 12.4 percent in May and to 11.4 percent in June.

This was in line with the government's aim to curb excessive growth in property prices, but avoid a market collapse, said Guo Jinlong, economist with the Institute of Finance and Banking of the Chinese Academy of Social Sciences.

Theoretically, prices would continue to go up, but start stabilizing after the country's population peaked around the year 2030, Guo said.

Yang Hongxu, an analyst with the Shanghai-based E-house China Research and Development Institute, expected price increases to slow further for the rest of the year and start to fall in the first quarter of 2011.


The government started a regulatory campaign in April to rein in soaring house prices and curb speculation, including tighter scrutiny of developers' financing, limited loans for third-home purchases, and higher down-payment requirements for second-home purchases.

On Tuesday, property stocks on China's two bourses plunged after government officials made it clear that regulatory policies would remain.

"Before some property sector indicators show serious correction, be it a more visible price decline or a drop in construction, we believe the government will not likely reverse course," Wang Tao, an economist with the UBS Securities, said in a note to clients.

Continuously sagging sales would erode the earnings of property developers if the government maintained its policies, and they were likely to cut investment, said Ha Jiming, chief economist at China International Capital Corp..

Investment in real estate development rose 38.1 percent year on year to 1.97 trillion yuan (291.68 billion U.S. dollars) in the first half, after a 38.2-percent increase in the January-May period. New projects and land purchases both climbed in June.

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