Housing demand poised to increase
By Qing Jie (China Daily)
Updated: 2004-08-25 13:57

Housing demands are going to rise further in the future with the market structure more rational and sound, experts are predicting.

Rising economic development, incomes and living standards are bringing momentum to the real estate market, according to the Market Economy Research Institute, which is affiliated to the State Council.

Official statistics reckon the residential area per capita in China reached 23.67 square metres last year, 0.88 square metres up on the previous year.

The aim is to achieve an average of 32 square metres per capita by 2020.

Experts also say affordable and middle-level housing will take more of a market share in the coming years.

The proportion of villa and luxury products is to drop.

The mix of housing supply has improved, with residential projects and affordable housing booming in the first half of this year.

Residential projects made up 68.3 per cent of the property market by the end of June, 1.3 percentage points higher than that of the end of February.

The proportion of affordable housing projects in the real estate sector climbed from 3.5 per cent at the end of February to 4.8 per cent by the end of the first six months of the year.

Thanks to the central government's cooling-down policies, some real estate developers have turned their focus from the land-tense and price-high eastern and coastal regions to the promising middle and western areas.

By the end of June, money pooled into the middle and western regions made up 30.02 per cent of the nation's property investment as a whole. While the figure was just 26.4 per cent in February.

The report predicted that the housing price is to further rise slightly because of the vigorous market need.

China's macro-control policies on land supply and bank loans have already had an effect on the overheating property industry.

First-grade land prices have increased and the acceleration of loans extended to developers slowed down during the first half of the year.

Property firms bought up 154.89 million square metres of land between January and June, up 2.8 per cent by the first half of last year, a drop of 51.9 percentage points compared with the growth rate of the year before.

Along with the slump in the land supply, trade prices of first-grade land witnessed a notable hike.

The average price in the second quarter of this year increased by 11.5 per cent from the corresponding period of last year and rose 4.1 per cent by the first three months this year.

The growth was more staggering in some key cities, hitting 81.3 per cent and 24.8 per cent in Hangzhou and Shanghai.

Since land is the basic raw material in real estate development, restraining supply and price increases resulted in a reduction in the number of new projects.

In the early half of this year, the combined area of new housing projects amounted to 280 million square metres, a rise of 15.2 per cent over the same period of last year, but 4.5 percentage points less than the growth rate of the previous year.

The central government's reining-in policy on housing loans to developers, involving hoisting loan thresholds, limits on mortgages for villas, luxury apartments and office buildings and second homes, has narrowed property companies' fund-raising channels.

Statistics from the People's Bank of China, China's central bank, revealed that by the end of May, the liquid capital credit balance on real estate developers' accounts amounted to 168.4 billion yuan (US$20.29 billion), posing a net decrease of 4.38 billion yuan (US$527.7 million) compared with the previous month and falling 14.43 billion yuan (US$1.74 billion) since the beginning of the year.

Fewer banking loans were given out to developers, which improved the fund structure of real estate enterprises and prompted a reshuffle of the nation's property industry.

More domestic and overseas funds have begun injecting capital into the market, and domestic large real estate enterprises have become more powerful and competitive through mergers and acquisitions.

The industrial consolidation might encourage real estate giants to relocate and optimize current resources as well as prevent multiple construction and resource waste, the report said.

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