Housing price mania estimated to cool down

Thursday's news of declining industrial performance in China stirred worries over the world's largest developing economy, but this week's property data may cheer up desperate buyers tortured by unaffordable housing prices. The sales value of residential homes in China dropped 5 percent year on year to 598.5 billion yuan (97.56 billion U.S. dollars) with the amount of floor space sold also down 1.2 percent in Jan.-Feb. 2014, according to data released on Thursday by the National Bureau of Statistics. Property developers' investment in residential property grew 18.4 percent, one percentage point lower than a year ago, the data showed. The gap between real estate companies is widening. The latest data showed that larger companies took more market share, as seven giants ended last year with sales value of over 100 billion yuan. Of particular note is the record 170-billion yuan taken by Vanke Co., the country's largest residential developer. The statistics indicated that the country's property mania is cooling down amid reforms and a slowing economy. "Housing prices surged too fast last year, especially in first-tier cities, which curbed the demand for investment and non-investment," said Wang Xiaoguang, a researcher at the Chinese Academy of Governance. He said withering housing consumption will trouble the real estate industry in 2014. Wang said he believes that this year will witness a turning point in the real estate industry to put a full stop on the previous housing boom. "Tightened credit policy, strained consumer demand and large inventory of unsold houses will create a period for the industry to cool down and adjust," Wang said. Zhu Zhongyi, deputy head of the China Real Estate Industry Association, estimated that the slowing economy will further push the real estate sector onto a smoother and more rational path. "The property mania needs pains to ease," Wang added. Han Siyi, property analyst with Shenyin Wanguo Securities, said that monetary policy also affected the industry, pointing to the previous two housing price declines that emerged in 2008 and 2012, both after the central bank increased capital reserves and loan interest rates. Chinese Premier Li Keqiang said on Thursday that the country will curb speculation and investment-oriented purchases and support people's reasonable needs for housing. Han said that a severe supply shortage of real estate still exists in the four first-tier cities, namely Shanghai, Beijing, Guangzhou and Shenzhen, but excess supply has swept many smaller Chinese cities. Premier Li said the goal of the government on the housing issue is to provide adequate housing for the entire population, noting that some 100 million Chinese still live in poor, run-down areas of cities. He said the government will redouble efforts to overhaul the run-down areas this year, pledging to rebuild 4.7 million shanty houses. More government-subsidized housing such as public rental houses will be built, and efforts will be made to ensure such housing will be distributed equitably. Meanwhile, Chen Huai, director of the Institute of Urban-Rural Development of China, said that the decisive role of the market should be fully developed as previous governmental regulations harmed the property market and stimulated housing prices.