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House price 'turning point' theory contested
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"China is in the process of development and imbalances in the real estate market can be expected to continue for some time. So in the coming years, we will keep a close watch on house prices," Qi Ji, Vice Minister of Construction, said March 17 during the on-going 11th National People's Congress.

"House prices have aroused people's attention on all sides. I have found many posts on the Internet discussing the theory of a so-called 'turning point' in the housing market. As we have said before, the ministry is keeping a close eye on house prices, but we don't agree with the 'turning point' theory," he continued.

House prices have seen strong growth for several years and many economists, netizens and even some real estate developers believe that prices have peaked and will drop sharply before long.

"House prices have been rising strongly for the past few years. In the second quarter of last year, the rate of increase was so steep that it threatened to take housing beyond the reach of many ordinary people. But you should also note that by fourth quarter of last year, house prices had started to drop in some areas. This is a good sign. It means the market is functioning properly by rebalancing supply and demand," Mr. Qi said.

Last year, the State Council held a special session to discuss the housing market and decided to encourage the development of low-cost houses for rent to low-income families. The government is also working hard to promote affordable housing for middle and low-income groups.

"The recent change in house prices shows the effectiveness of our macro-economic regulations. People have adjusted their demand for housing." the vice minister said.

Over the past few years, the Ministry of Construction has imposed stricter controls on real estate lending. "While taking care to ensure sufficient supply to the market, we will continue to make adjustments to the market structure," Mr. Qi said. "The housing market is a big cake, and we want to make sure middle and low income families get their fair share."

Meanwhile, the ministry has also stepped up measures to curb speculation and profiteering. Measures to regulate demand have had "positive" effects, said the vice minister.

(China.org.cn by staff reporter Chen Xia, March 18, 2008)

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