The government will continue to regulate land supply for real estate development this year but promised to transfer more to construct economical housing for low-income families, said a cabinet official.

 

Yuan Xiaosu, vice-minister of land and resources, urged local governments to stop selling land to investors at low prices, in a bid to protect the country's limited land resources.

 

He said the government would continuously protect primary farmland and prevent misuse and illegal occupation of farmland so as to ensure the country's grain security.

 

But Yuan said the government plans to supply more land to construct low-cost housing in an effort to satisfy growing needs and curb rising real estate prices.

 

"We are still facing the demanding task of regulating land supply in 2006 to keep land and real estate prices stable," Xinhua quoted Yuan as saying.

 

The task has also challenged Construction Minister Wang Guangtao, who said that overheated investment in the country's real estate sector was basically curbed in 2005.

 

"More real estate development will use more arable land," said Wang. "That will cause concern over grain safety in turn," he warned.

 

As China sped up its urbanization and modernization of rural regions, the majority of 1.3 billion Chinese have planned or started to buy or build more spacious homes.

 

Per capita living space in cities increased from 20 square metters in 2000 to 25 square meters last year. The figure is 40 in the United States, 38 in Germany, and 30 in Japan and Singapore.

 

Wang said that housing supply in the country is out of balance, with insufficient lower-priced, smaller houses for low-income families.

 

China's real estate market has experienced a major growth in some regions since 2002 with house prices increasing at around 15 percent annually on average.

 

In August 2004, the central government started to tighten land and loan supply to curb the trend.

 

"Measures will continue this year as the development is constrained by shortage of land supply," said Wang.

 

Wang said the real estate sector in 2005 saw a year-on-year increase of 21 percent.

 

Statistics from the National Development and Reform Commission (NDRC) indicated that real estate prices nationwide posted a 6.5 percent year-on-year increase on average during the last quarter in 2005.

 

The increase rate has slowed down compared with 10.1 percent in the first half and 12.5 percent in the first quarter of the year.

 

In spite of the slowdown in price increases, ordinary households in China need to work for years to satisfy their housing needs.

 

According to current income standards, the World Bank believes that the average household, worldwide, can earn enough money to buy an apartment in five years. But in China, that figure is 12 years for an average urban family.

 

"The government should take measures to lower house prices," said Xiao Zhuoji, a renowned economist with Peking University.

 

Xiao said the government should take measures to cap land transfer fees and the profits of real estate developers. "The fees and high profits have pushed real estate running up," said Xiao.

 

He said profit rate in China's real estate sector averaged 40 percent but rational rate is only about 5 percent.

 

(China Daily February 6, 2006)