The nation's sizzling real estate market recorded strong growth
in the first quarter despite the government's effort to cool down
the industry.
The investment numbers rose sharply in many parts of the country
despite three lending rate increases in the past year.
According to statistics released by the National Development and
Reform Commission (NDRC), real estate investments totaled 354.38
billion yuan (US$45.9 billion) in the first quarter. The figure
represents a first-quarter growth of 6.7 percent compared to the
same period last year.
Geographically speaking, investments in the east, middle and
western parts of the country grew 24.3 percent, 36.2 percent and
29.3 percent, respectively in the first three months. Henan and
Anhui provinces saw jumps of 59.1 percent and 52.4 percent,
respectively.
Last year, real estate investments grew just 21.8 percent on
average. That was credited to macro-control measures imposed by the
government since 2003.
Thus, the first quarter's growth contradicts the objective of
the government's cooling measures. The NDRC characterized it as
being "a bit faster".
Yang Hongxu, an analyst from Shanghai E-house Research
Institute, said: "To my surprise, real estate investment in China
has continued to expand after more than half a year's cooling
measures by the government."
Since early last year, the central government has intensified
its macro-control measures in the real estate sector with changes
in land, tax, foreign capital and interest rate policies.
Since last April, the central bank raised the one-year benchmark
lending-rate three times, each at a rate of 27 basis points that
sought to increase the price of capital and tighten the money
supply.
Recently, some predicted new increases were needed.
Yang Qing, head of research at Colliers International Beijing
office, said: "I believe the central bank will probably raise the
interest rate again to curb the investing sentiment in the real
estate sector."
He said three previous hikes had no clear impact on the
market.
As banks try to tighten the flow of money, real estate
developers have been trying alternatives to meet their financial
needs. Some domestic developers, especially smaller ones, have
complained.
As the capital market matures, developers are getting more
options such as debts, trusts and securities. They can also attract
more foreign capital, as the yuan is on a positive course and the
domestic real estate market becomes more transparent.
According to the report by the NDRC, non-banking financial
institutions lent 12.64 billion yuan in the first quarter to the
real estate sector, a rise of 66.9 percent from last year.
In the meantime, 13.13 billion yuan was pumped into the real
estate industry by foreign companies, a rise of 154.4 percent from
last year. Direct investment by foreign markets reached 10.27
billion yuan, an increase of 192.5 percent.
Measures to curb foreign investment in the real estate market
seemed to have the opposite affect.
For example, more than 100 real estate investment funds are in
search of opportunities.
"Nearly every week, we receive enquires from our foreign clients
about the real estate market conditions in Beijing," Yang Qing
said.
(China Daily April 20, 2007)