The Ministry of Construction (MOC) has launched a nationwide inspection to determine whether the nation's real estate development is overheated, and is ready to take pre-emptive measures to nip any such problem in the bud.

In view of the total supply and demand in the real estate market, it is not accurate at present to say that there is overheating in China's real estate industry, said Wang Yiming, a researcher at the State Development and Reform Commission.

But Wang warned of potential risks in real estate investment.

From 1998 to 2002, the average growth rate of investment in China's real estate industry was around 20 percent.

During the first half this year, the total investment in the same sector was 381.7 billion yuan (about US$46 billion), a surge of 34 percent over the same period of last year, up nearly 12 percentage points.

Yang Shen, president of the China Real Estate Association, said that despite the impact of SARS, China's real estate industry has maintained rapid growth. But the 34-percent growth rate in housing investment is a bit too precipitous, which will influence the overall development of the real estate industry.

The fast-increasing investment has resulted in higher housing prices in China. The average national housing price in the second quarter of this year climbed 5 percent over that of the first quarter. At the same time, land prices went up 7.1 percent, and housing rentals rose 1.9 percent.

Currently, the ratio between China's housing price in most cities and residents' average income is usually six times higher than the international average; in Beijing and Shanghai the ratio is 10 times higher.

In 2002, 26 percent of China's commercial houses were unsold, breaking the international alert level of 10 percent. And in the first half of this year, the percentage of unsold houses had increased 8.6 percent year-on-year.

Zhang Yuanduan, vice-president of China Real Estate and Housing Research Association, said the total area of China's unsold houses in the past six years tops 400 million square meters, which is a serious situation.

In the first six months of this year, the loans provided by banks across the country totaled 1.8 trillion yuan (about US$217.5 billion) -- nearly the total for the whole of last year-- of which a great part flowed into the real estate industry.

To prevent the risks of bubbles arising in the real estate industry, China's banking sector has taken measures to control the loan service among developers and house brokers.

The MOC will also issue a series of adjustment measures for a rational and healthy development of the real estate industry.

Tong Yuezhong, deputy director of the MOC housing industrialization promotion center, said these control measures have not been taken in order to halt the fast growth of the real estate industry, but to readjust the housing structure and build more houses for low- and middle-income people.

According to the MOC, by 2010 China will need to build 8 billion square meters of housing space to meet the market demand. The present readjustment of the real estate market will surely help further boost China's economy, MOC sources said.

(Xinhua News Agency August 26, 2003)