Worries reasonable, housing price tumble unlikely
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E-mail Xinhua, May 6, 2014
Relentless rumors and declining sales rattled nerves in the Chinese economy as worries about a tumble in home prices spread last week.
"A housing price tumble is unlikely, and the real estate slump is an entirely exaggerated forecast," said Jia Kang, director of the Research Institute for Fiscal Science at China's Ministry of Finance.
Rumor or truth
Many investors and housing developers failed to enjoy Labor Day as rumors about minutes from a meeting held during the three-day holiday darkened expectations for the country's real estate industry.
According to the rumored minutes, Mao Daqing, vice president of China Vanke, the country's largest property developer by revenue, showed pessimism about the property bubble and said a real estate slump is brewing.
Mao soon after claimed the alleged statements were rumor, explaining that his warning about risks during an internal seminar had been distorted and his words had been deliberately mixed with other attendees' worries.
However, the country's disappointing performance in real estate this year has led some to believe the rumors are true.
Nationwide the total area of property sold in the first quarter edged down 3.8 percent year on year, and combined sales revenue dropped 5.2 percent year on year, figures from the National Bureau of Statistics (NBS) revealed.
According to statistics from Homelink, one of China's largest real estate agency and consultancy companies, residential housing sales dropped 18.4 percent month on month in April, down 18.1 percent from a year ago.
Meanwhile, slower property investment growth was seen as a major drag on China's fixed asset spending in the first quarter, weighing on broader economic growth, which dipped to 7.4 percent during the period.
Unlikely tumble
Whether the statements were real or not, Vanke and governmental officials did not hesitate to explain and calm the reactions to rumors of a slump.
Yu Liang, president of Vanke, explained the rumor incident during an interview with Leju, a housing service online-to-online platform, saying that the company held a "prudent and optimistic" attitude toward the industry.
"Mao was trying to remind about market risks amid industry declines," Yu said. "The sense of risk should be enhanced among real estate companies and related investors."
He said the gaps between housing sales in different cities were widening, but would be eased under the nationwide declines in housing industry growth.
"Confidence should be had in the industry as China's urbanization process still offers vast development space for real estate businesses," Yu said.
Zhu Zhongyi, vice president of China Real Estate Association, said that individual cases of housing price declines did not indicate an overall real estate slump.
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