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It's correction time: China's housing market to slow down
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The current correction in the country's housing market, characterized by shrinking sales and decreasing prices, is likely to continue for at least one year, a latest industry report released by Shanghai Shenyin Wanguo Research & Consulting Co predicted.

"The correction has just started,'' Yin Zi, an industry analyst with SYWG Research & Consulting, said in the report released yesterday.

The inventory of residential houses, however, will continue to rise across the country at least through 2009 as projects were planned during the previous market boom. "A drop in the inventory/sales ratio, usually a signal that prices are hitting the bottom, is not likely to be seen by 2010,'' Yin said.

In the meantime, people need to recoup their purchasing power amid price reductions and this is expected to be a rather long and gradual process, Yin said.

The report also forecast that nationally, annual growth in real estate investment will be around 24 percent in 2008. This will drop drastically to 5 percent in 2009.

Analysts say, there will also be a 6 percent drop in the area on which new constructions commence in 2009, after a 5-percent increase this year.

China Vanke Co Ltd, the country's largest publicly-listed real estate developer, said earlier this month it has already adjusted its development plans for the year given the changed market situation.

The company has reduced the area for its new constructions to 3.5 million square meters for the second half of the year. The projects to be completed in this period have also been slashed to 4.29 million square meters.

The one-year correction forecast now seems to be widely adopted among industry experts.

Last month, Guo Guangchang, chairman and chief executive officer of Fosun, China's largest private company with operations in steel, real estate, pharmaceuticals, retail, mining, financial services and strategic investments, told a regional forum that he believed the correction will probably last over the next 12 months.

He, however, remains upbeat about the industry's long-term prospects.

(Shanghai Daily August 27, 2008)

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