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Housing price drop unlikely

By Chen Jia (China Daily)
Updated: 2010-05-06 09:38

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BEIJING - Housing prices are unlikely to drop this year despite tightening measures adopted by the government to cool the property market, a top think tank and senior economists said on Wednesday.

The annual report on the state of the real estate industry released by the Chinese Academy of Social Sciences warned that rocketing housing prices have become the biggest obstacle to the healthy development of the sector.

But Wang Juelin, deputy director of the policy research center of the Ministry of Housing and Urban-Rural Development, said he does not expect housing prices to decline drastically this year after dramatic increases in the latter half of last year.

Niu Fengrui, former director of the research center for urban development and environment at the Chinese Academy of Social Sciences, said the government's tightening policy has led to stagnation in housing prices.

Even in the long term, prices are unlikely to "experience a big fall," he said.

Some insiders earlier estimated that prices in Beijing may slump by as much as 30 percent by the end of this year after a series of moves by the central government to curb speculation and soaring prices.

Measures to cool the market include a ban on loans for third-home purchases, and raising mortgage rates and down-payment requirements for second-home purchases.

The central bank has also raised banks' reserve requirements, mopping up liquidity.

Property prices in 70 major cities jumped a record 11.7 percent in March, fueling concern that lending growth and inflows of capital from abroad are creating asset bubbles.

"Housing prices are too high, and the public will lose confidence in the government if rocketing prices keep shattering the common people's dream of owning their own apartments," Wang said. Housing prices are not only an economic issue but also political, he added.

"There's uncertainty about housing prices due to the changing economic situation this year," Li Jingguo, director of the research center for urban development and environment affiliated to the Chinese Academy of Social Sciences, said on Wednesday.

"Only a credit crunch will cause prices to drop in the second half of this year," he said.

But the policy environment is good, and the central bank earlier said it would maintain a moderately easy monetary policy this year, he added.

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