China's average housing prices rose 14.4 percent last year, despite the government taking a series of macro-control measures to try to cool them down.
The National Bureau of Statistics said Friday that the growth rate of last year's housing prices was 10.6 percentage points higher than that of 2003, without providing an exact price figure.
Residential housing prices rose 15.2 percent last year compared with 2003, the bureau said.
Economist Niu Li of the State Information Center said house prices are rising too much.
"There are bubbles existing in the sector, especially in the luxury housing sector."
The bubbles could result in a series of economic problems, if the government does not deal with them properly, he said.
Gu Yunchang, secretary-general of the China Real Estate Association, agreed the housing sector in some of the country's cities such as Shanghai, Hangzhou and Ningbo had bubbles.
But the bubbles were only partial and not very serious, he said.
"They are controllable," he said.
Local governments in those cities have already taken measures to deal with them.
Gu also admitted last year's housing price rise was the fastest since 1998.
The higher housing prices were mainly caused by the strong demand but limited supply, as well as the rising costs of building materials, he said.
Aiming to cool the overheated investment, the government tightened control of land supply and bank loans.
The government also raised the benchmark renminbi interest rate by 0.27 of a percentage point last October, for the first time in nine years, to discourage investment.
Due to those measures, housing supply became tight.
Figures from the National Bureau of Statistics indicate that last year there were only 223 million square meters of land used by real estate companies to develop housing, a drop of 11.4 percent from 2003.
Last year, construction was started on 604 million square meters, an increase of 10.4 percent, and 425 million square meters of housing were completed, an increase of 2.1 percent.
However, housing sales reached 382 million square meters, an increase of 44.12 million square meters from 2003.
Niu said the macro-control measures, which aim to curb the price rise, in fact fuel the price rise.
Liao Yingmin, a researcher with the State Council Development Research Center, said China's housing price rise would become stable this year, due to the improved supply situation.
The government has already decided to curb irrational demand, but increase supply of medium and low-priced housing.
It has also decided to expand the old housing market this year.
"This will not only help increase supply, but also improve the supply structure," she said.
However, strong demand will continue to keep house prices at a high level, she said.
China's housing industry has already become a new growth area for the country's economic development.
(China Daily March 5, 2005)