According to an Economic Information Daily report on
April 3, the four-year fast growth of real estate prices will slow
down from the second half of this year. This is predicted in a
survey on the financial security of China's real estate, which was
conducted by the Financial Research Center of Beijing Normal
University.
The survey points out that 70 percent of residents in urban
areas simply don't have the purchasing power and between 80-90
percent of real estate developers could find themselves in
difficulties over the next few years.
The survey shows that the year 2002 was a watershed in China's
real estate business as the speed of sales has since failed to keep
pace with investment. A lot of capital was invested in property but
signals in that year indicated a downturn in the
market.
The gap between the rates of construction and sale has grown
significantly in the past few years and many properties have
been left empty. In 2003, such properties measured about 128
million square meters and in 2004 that figure stood at 123 million
square meters. As a result, around 423.8 billion yuan (US$52.975
billion) in capital investments was locked up in 2004. This
phenomenon emerged mainly in the coastal towns and cities.
Over the past three years the average real estate price in the
eastern part of China has reached about 4,000 yuan (US$800) per
square meter. It is much higher in some big cities including
Beijing, Shanghai and Nanjing.
According to the survey, the average annual income of an urban
family is about 15,000 to 17,000 yuan (US$1,875 to 2,125). Such
high property prices mean that at least 70 percent of urban
residents simply don't have the buying power to enter the
market.
Zhong Wei, director of the Financial Research Center, holds the
view that current market trend, developers' balance statements and
keen competition in the business have all indicated a slowdown in
the growth of the real estate industry.
He said that 90 percent of the middle and small developers would
possibly be excluded from the market since foreign enterprises
would be admitted into China's real estate industry this year.
According to him, urban residents should consider purchasing
second-hand housing and the government should come up with policies
to gradually meet the growing demand of people from all levels of
society.
(China.org.cn by Wang Ke, April 4, 2006)