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House Price Rises Slowing down

The pace of house price rises in China continued to slow down in the third quarter of this year, according to the latest official survey.

The nationwide average house price achieved a 4.1 per cent year-on-year increase during the July-September period, a slight reduction from the rate of 5 per cent during the second quarter of this year.

The quarterly statistics were jointly released by the State Development and Reform Commission and the National Bureau of Statistics over the weekend after investigating the housing market in 35 major cities across the country.

During the first nine months of this year, the nationwide average house price increased to 2,314 yuan (US$279) per square metre.

The growth rate has also slowed down from the 5.4 per cent in the first quarter.

The survey found that in China's economically booming areas such as Shanghai and the coastal city of Qingdao, house prices have kept on rising but prices were declining in some cities in western China.

The local real estate sector has paid great attention to Shanghai's year-on-year increase rate of 21.5 per cent during the July-September period.

A report from the Shanghai Housing Index Office said the city's rising house prices are unlikely to stop anytime soon, with a possible 30-per cent growth rate this year.

For the first nine months, house prices had already surged 23 per cent, compared with an annual 15.5 per cent growth in 2002, according to the report.

Based on the sharp increase in the first three-quarters of the year, the index office raised its forecast for the annual growth rate to 30 per cent from the previous 25 per cent in August.

The average house price was 4,553 yuan (US$549) at the end of 2002 in the city, according to the National Bureau of Statistics. A 30-per cent growth indicates prices will rise to about 5,900 yuan (US$711) at the end of this year.

"The large increase indicated strong demand for property investment, particularly in the high-end residential projects priced above 8,000 yuan (US$964) per square metre,'' said He Xiaocheng, an analyst at the index office.

During the recent years, nationwide investment fever has occurred and house prices have been on the rise.

Many experts and economists have warned the sector could overheat, especially facing the situation that China's real estate investment has gained a year-on-year increase of 34 per cent during the previous three-quarters.

"Accompanying a speedy increase in some other sectors, heated investment in real estate has become a potential risk to our economy,'' said the country's respected economist Wu Jinglian, working with the Development and Research Centre affiliated to the State Council.

But the Ministry of Construction said there will be a huge potential demand from China's homebuyers during the coming 20 years.

The ministry said that by 2010 China will need to build 8 billion square metres of housing space to meet market demand.

Tong Yuezhong, deputy director of the MOC housing industrialization promotion centre, said the control measures were not necessary for now to halt the fast growth of the real estate industry but the government should take measures to readjust the housing structure and build more houses for low and middle-income people.
(China Daily October 27, 2003)


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