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Housing Price Hike Induces Overheating Worries

Housing prices in the Chinese economic hub of Shanghai have achieved a year-on-year increase of nearly 30 percent during the first quarter this year, the fastest growth among 35 major cities.

The State Development and Reform Commission Tuesday said Shanghai has taken the lead nationally, followed by Northeast China's Shenyang and East China's Qingdao, where housing prices went up by 19.6 percent and 16 percent respectively.

The commission said during the first quarter, nationwide prices, driven by robust real estate investment and sales, have increased by 7.7 percent on average compared with the same period last year.

Compared with the fourth quarter in 2003,national average housing prices have increased by 2.6 percent.

"Housing prices nationwide have risen quickly," the commission, the government's most powerful department in charge of economic operation, said Tuesday in a circular.

The commission has closely monitored housing prices in China's most bustling 35 cities nationwide. It said housing prices in 10 cities have gone up by at least 10 percent during the January-March period.

But prices in Beijing, famous among Chinese for expensive house, remained stable with only 1.8 percent year-on-year increases during the same period.

In Shanghai, the government has taken measures to curb the fast price rises, according to Cai Yutian, director of Shanghai Administration of Housing, Land and Resources.

He said Shanghai will learn from Hong Kong's experience in controlling the real estate market, with the government intervening in and limit trading of commercial housing before owners get housing permits.

Statistics show 16 percent of the houses purchased serves investment and speculation purposes, just below the international alarm rate of 20 percent.

As China's economic powerhouse, Shanghai has observed soaring housing prices in recent years. Its commercial housing prices topped 5,118 yuan (US$617) per square metre last year, about 24.2 percent or 1,000 yuan up from the previous year.

Yang Shen, chairman of the China Real Estate Association said tougher measures should be put in place to ward off risks in China's bullish real estate sector despite housing demands in the country remaining strong.

"Measures should be taken to curb the rise," said Yang. "We should be on the alert because the sector has been on a fast track for a long time."

But the Ministry of Construction ruled out so-called "bubbles'' which some industry insiders believe exist within China's real estate, even though investments in housing soared by more than 30 percent on a year-to-year basis from January to March.

From 1998 to 2003, the average growth rate of investments in Chinese real estate was around 25 percent.

But Liu Zhifeng, vice-minister of the ministry said that Chinese demand for housing will be about 12 billion square metres of space within the next two decades. The average living space of more than 50 percent of urban residents is below the average per capita amount recorded in 2002, 22-square metres of space.

"We need a relatively long period of fast development in real estate, which is regarded as a main engine in China's economy," said Liu.

The commission Tuesday also said the government's housing supply is not as balanced because common commercial apartments are not available in large enough numbers, while there is an oversupply of luxury apartments and high-end villas.
(China Daily April 21, 2004)

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