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Housing bubble or housing riddle?
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The biannual Beijing housing fair is often considered a trend-setter for the real estate industry's performance in China. Since its humble beginnings as a local fair, it has grown in stature and today attracts leading developers from France, Australia and the US.

Housing bubble or housing riddle?
Housing bubble or housing riddle? [CFP]

This year also the fair evoked good response. The latest Beijing housing fair was held at the China World Trade Center from April 8 to 12. According to Xinhua reports, the fair attracted over 150,000 visitors, while contracts worth 3.1 billion yuan were signed.

Though skeptics dismissed the figures as being cooked up by developers, the reality is that property sales have started rebounding in China. Reports from Beijing, Shanghai, Shenzhen, Chengdu, Hangzhou and many other cities point to increased sales in March, in terms of new and second-hand dwellings.

The robust sales in March have helped China gain, in the first quarter of 2009, an increase in the sales of new housing units of 8.2 percent year-on-year, including an even stronger 8.7 percent rise in residential housing, according to the National Bureau of Statistics (NBS).

In Shenzhen, a migrant city adjacent to Hong Kong, housing sales in the first quarter reportedly doubled over the previous quarter.

So much so that even furniture merchants are now beginning to see the light at the end of the tunnel, compared to when they had to cut prices by nearly 25 percent in the first two months.

The robust sales, however, have not necessarily pushed up prices. In February, the nation's general housing price index declined for the third month in a row, by a negative 1.2 percent year-on-year, according to the NBS.

That led E-House, a Shanghai-based real estate consulting firm, to predict an even deeper price slump in March, probably by a negative 5 percent year-on-year - while the NBS figures revealed it was a negative 1.3 percent.

Some industry observers even went to the extent of predicting that developers would have to cut offer prices by nearly 40 to 50 percent by the end of the year.

The State Council Development Research Center, however, said it expects general housing prices to decline at a much lower rate of 10 percent or even lesser.

The indicators clearly show that on the price front it is more or less going to be a flat year, while in terms of sales it would be a much better one. If this turns out to be true, then it would be a rare situation, wherein it would benefit both homeowners and residential housing investors.

Let us take a closer look at how this could be possible. The obvious question is how can there be more sales but not so much in terms of price increases. Further on, one may wonder how the middle-class buyers suddenly have more affordable home-buying options.

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