BEIJING - A series of
official statements from government agencies has
led to speculation that last year's macroeconomic
control measures, intended to cool excessive
growth in China's real estate sector, will soon be
relaxed.
For example, China's National
Development and Reform Commission (NDRC), the
central government organ in charge of
macroeconomic control measures, recently released
on its website a document concerning the focus of
controls on the real estate industry in 2006, in
which new wording was seen: the state
will
"encourage residents to buy houses in good time
and appropriately". The new wording differed
significantly from that in the equivalent document
last year, which stressed the need for effective
control of the property sector.
In
addition, the People's Bank of China (PBoC),
China's central bank, issued three reports in the
past two weeks, one on the implementation of
monetary policy in the fourth quarter of 2005 and
two on the financial operations of the Beijing and Shanghai municipalities,
all of which used looser wording when referring to
the real estate industry.
These official
documents are perceived by some experts as a sign
the government is moderately adjusting its policy
on the real estate industry and might loosen the
credit supply for the industry. Yin Zhongli, a
real estate expert with the Chinese Academy of
Social Sciences, said the use of the word
"encourage" reflects the anxiety of macroeconomic
control authorities over the new situation in the
real estate market.
Since China
implemented controls to rein in excessively high
real estate prices last year, many prospective
homebuyers were not clear on whether not the
government would initiate further control
measures. Many, therefore, took a wait-and-see
attitude and waited to see if further declines in
housing prices occurred. This psychologically
based cool-down in house purchase was a worrisome
development for the banking, steel and building
materials industries, Yin noted.
In
Shanghai, the biggest target of macroeconomic
control over the real estate industry last year, a
phenomenon of declines in home purchase loans
coupled with increases in real estate development
loans took place. This was obviously an
undesirable development for banks, as they would
eventually face greater risks in recouping their
lending from property developers as a result. It
was also particularly worrying for the steel and
building materials industries, which are already
suffering from overcapacity. According to Yin,
housing prices are currently not low from the
perspective of ordinary homebuyers. Yin notes that
one cannot be too optimistic as to the effect of
the new wording on encouraging house purchases.
Meanwhile, the new wording in the latest
three central bank reports indicates that the
credit policy toward real estate credits is likely
to ease. According to the fourth quarter monetary
policy report, nationwide real estate loans
outstanding grew 16.1% in 2005, down 12.6
percentage points from the figure for 2004. The
Beijing financial operation report revealed that
investment in real estate development in the
Chinese capital increased only 3.5% in 2005, down
19 percentage points from 2004.
The
Shanghai report unveiled a range of declines in
house purchase credits: individual housing loans
had posted negative growth for six consecutive
months by the end of 2005, with the cumulative
decline in July to December amounting to 11.7
billion yuan. It also noted that the central bank
report on Shanghai no longer mentioned real estate
credit risks, instead giving a warning on the low
level of real estate transactions.
Macroeconomic controls seen to pay
off After a series of control policies
promulgated and implemented in 2005, the trend of
excessive investment in China's real estate sector
has been curbed, the overheated demand for houses
is cooling down and the supply and demand
relations in the real estate market are improving,
creating conditions for a stable housing market.
All in all, China's real estate market is
developing toward the expected target, and the
macroeconomic control policies are generally
regarded to have paid off.
Since the
Chinese government tightened land-use examination
and approval and credit extension, investment
growth in the real estate sector in the country
has been slipping. According to statistics
provided by the National Bureau of Statistics,
China achieved an investment of 1.5759 trillion
yuan in real estate in 2005, up 19.8%
year-on-year.
The growth is 8.3 percentage
points lower than in 2004 and 7.4 percentage
points lower than that of fixed-assets investment
in urban areas. As of May, the growth of
investment in real estate development has for
eight consecutive years been lower than that of
fixed-assets investment in urban areas in China.
Dynamic monitoring by the Ministry of Land
and Resources showed that land supply for real
estate developers in 2005 decreased by 20.2% as
compared with in 2004. However, the proportion of
land supplied to construction of economy houses
increased by 0.7 percentage points.
Meanwhile, the land area purchased by real
estate developers decreased by 4% in 2005 while
the area of land developed increased by 5.2%. PBoC
statistics show that by the end of 2005,
outstanding commercial loans for real estate
development totaled 2.77 trillion yuan, up 16.1%
year-on-year, 12.6 percentage points lower than at
the end of 2004. Specifically, outstanding loans
for personal homes amounted to 1.84 trillion yuan,
up 15.8%.
Surveys on real estate prices in
70 large and medium-sized cities, conducted by the
National Bureau of Statistics, show that since the
latter half of 2005, prices in various markets
have fluctuated slightly and growth has slowed
down, with house prices in some cities dropping
steadily.
Selling prices of newly
constructed commodity houses in the 70 cities grew
7.5% year-on-year in the fourth quarter of 2005,
3.6 percentage points lower than in the same
period of 2004. Breaking selling prices down by
type, prices of economy, ordinary and high-grade
houses grew 3.9%, 6.8% and 9.3%, respectively.
Except for economy houses, whose sales price
growth was 1.3 percentage points higher
year-on-year, growth of ordinary and high-grade
houses fell 4.8 and 3.2 percentage points,
respectively.
Selling prices of
second-hand houses grew 5.8% in the fourth
quarter, 12.5 percentage points lower year on
year; that of non-residential commodity houses
grew 4.8%, 2.6 percentage points lower; and the
rental price of houses grew 1.6%, 0.4 percentage
points lower.
Thanks to adjustments in the
housing taxation policy and loan rate and adoption
of a series of control measures, the speculative
purchase of houses has been put under control
effectively. The proportion of houses purchased
for self-use (as opposed to resale) has begun to
rise; the relation between the supply and demand
of houses has improved; and the market transaction
volume has been tending towards stability.
In spite of the successful macroeconomic
control measures, certain problems in the property
market still need to be addressed. Although the
market is expected to remain stable in 2006, the
structural problem has yet to be fundamentally
resolved; housing prices in some places are still
rising rapidly; the pressure of speculative
investment demand still remains; the real estate
market supervision system in some cities needs to
be improved; and new, uncertain factors may yet
pose a threat to the healthy and orderly
development of the real estate market.
