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Property market may warm up till 2010

By Yu Hongyan (chinadaily.com.cn)
Updated: 2008-10-20 17:32

China's real estate market may enter another round of expansion around 2010, after the adjustment and transformation of the market, predicted a professor from Zhejiang University.

Jia Shenghua, deputy of the real estate research center in Zhejiang University, said that unlike ordinary consumables, the real estate sector is a quasi-financial market with periodicity.

"Judging from the current situation, the market in general is in a descending period, which may last for a period of time, and it may take until 2010 for the market to go up and expand again," said Jia.

Zhong Wei, deputy of the financial research institute of Beijing Normal University, said in his latest research that the land market is already in an intensifying adjustment, house prices will come to reasonable levels, and the real estate industry in China will confront a financial gap of 673 billion yuan ($98.47 billion).

The withering demand and credit crunch in the property market indicates the adjustment of this sector, however, capital injection itself will not solve the fundamental problem in this industry, said the report.

The real estate market has been waning since the end of last year, and the transaction volume has fallen sharply.

According to the China Real Estate Association, unsold commercial departments across the country totaled 130 million square meters by the end of August, the largest area unsold in recent years. Statistics also have it that only 2,788 pre-construction units were sold in Beijing last month, down 76 percent year-on-year, making it the lowest monthly transaction volume in the past three years.

Zhu Zhongyi, vice-chairman of China Real Estate Association, pointed out that the real estate market is closely connected with the macro economy, government's macro control, the general rule of this sector as well as consumer anticipation and seller confidence.

The gloomy property market, Zhu said, is a result of the adjustment of the domestic economy, the financial crisis and the global macroeconomic slowdown. However, the previously tightening monetary policy and governments' welfare houses have further impacted this sector. Moreover, the skyrocketing house prices, far beyond the reach of house buyers, reduce consumers to wait and see until the bubble burst after the adjustment in the market.

A report from China International Capital Corporation Limited states that, in its survey of major sample cities, monthly installments for a house account for as much as 75 percent of a household's income, far above the general standard in the West, which are at about the level of 40 percent.

The cooling real estate market has many local governments sweating as it contributes a lot to local fiscal income. By the end of last week, 18 cities were announcing policies to boost property markets, including Shanghai, Hangzhou, Xi'an and Xiamen.

Unlike previous measures to curb the overheating real estate market, rescue policies now include reimbursements to house buyers and tax cuts to developers.