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Housing costs stable but builders face woes
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Housing prices will likely remain stable over the next 12 months while real estate developers will face greater pressures in financing amid tighter government controls, industry experts said yesterday.


"Due to the increasingly stricter regulations aimed at both adjusting the imbalance between demand and supply and curbing the soaring property prices, we expect an easing in price rises in the Chinese property market," Fitch Ratings said yesterday in a market outlook report. "Property developers are, however, likely to face more pressure in financing and liquidity this year."


A widening gap between demand and supply has been driving up real estate prices in China over the past few years.


One factor is that land shortages and land hoarding have led to an undersupply, and another is that rising investment-driven demand have pushed property prices to a record high, industry people said.


"The market will consequently face stricter regulations, and credit tightening will become the normal practice in the sector," said Matthew Kong, associate director with Fitch's Asia Corporates team. "However, the authorities will put more emphasis on addressing supply issues while continuing to curb demand to narrow the demand-supply gap and stabilize property prices."


One of the latest measures by the central government to increase land supply is to charge developers a 20-percent fee, based on the land transaction price, if they hoard plots which have been idle for more than one year but less than two years after acquisition. Those which have been empty for more than two years will be reclaimed by the government, the State Council, China's Cabinet, said in a notice on its website last week.


(Shanghai Daily January 18, 2008)

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