THE shrinking transaction volume of homes coupled with the "wait-and-see" sentiment currently found in some parts of the country won't necessarily lead to a "turning point" for house prices, the Chinese Academy of Social Sciences said over the weekend in its annual industry blue paper.
As a result of tougher macro-control policies introduced to curb the overheated domestic real-estate market, growth of home prices will be rather insignificant this year compared to that achieved in 2007. That's the conclusion of a blue paper titled "China Real Estate Development Report," compiled by the Urban Development & Environment Research Center under the academy.
"Massive bearish sentiment, which usually indicates a continuous downward trend in housing prices lasting for three to five years, is not expected to occur in China at the current stage," said Niu Fengrui, the UDERC head. "In fact, chances for the coming of the real 'turning point' for the country's real estate industry are also small, even over the coming few decades."
Industry experts believe demand for residential properties, fueled by the country's rapid urbanization process, people's desire to improve their living standards, and relocations caused by large infrastructure projects and urban development plans, will remain robust. These will serve as the fundamental reasons for a long-term shortage of homes in the country, the experts said.
Zhu Zhongyi, vice chairman of the China Real Estate Association, echoed the point that it is normal for housing prices to fluctuate in some parts of the country for some time.
Uncertainties in the global economy together with continuous expectations for yuan appreciation are expected to divert a big amount of overseas capital into China's real estate market and help lift prices.
Cooling measures
In an earlier report released by the National Development and Reform Commission, excessive liquidity and appreciation of the currency, rising material and labor costs, a deep correction of the stock market and robust end-users' demands have been identified as possible drivers of higher home prices in the country.
However, the blue paper said that earlier cooling measures introduced by the central government will continue to help prevent housing prices from significant increases.
It also predicted that such tough stance will be further strengthened this year by the government with existing policies being thoroughly conducted and some new measures being worked out.
Areas likely to be tapped include stricter monetary policy, financing on real estate development and restrictions on speculative investment.
As for Shanghai, the blue paper said insufficient supply of new homes will lead to mounting pressures and higher prices in the coming two to three years.
According to Li Jingguo, a UDERC researcher, investment in real-estate development has grown at a comparatively slow pace in Shanghai. In 2007, 130.75 billion yuan (US$18.68 billion) was poured into property development in Shanghai - an increase of 2.5 percent from 2006 - while the nationwide figure was 2.528 trillion yuan, a year-on-year increase of 30.2 percent.
Statistics showed that real-estate investment has been taking up a decreasing proportion of total fixed assets investment in Shanghai over the past three years. It fell to 29.3 percent in 2007 from its peak of 38.1 percent in 2004.
According to research conducted by Shanghai Youwin Real Estate Information Service Co, the city's land supply for residential properties dropped to around 20 million square meters in terms of gross floor area in both 2006 and 2007, as compared to 33 million, 28.88 million and 31.49 million square meters between 2003 and 2005. Only 16 million square meters of housing projects are beginning construction this year.