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Experts predict housing stock could run out

By Wang Ying (China Daily)
Updated: 2009-08-25 10:59

Six months ago, experts were predicting it could take more than two years for China's surplus housing to be snapped up in a sluggish market, while prices would slump another 30 percent.

Potential buyers visit a real estate exhibition in Dalian, Liaoning province. [China Daily/Liu Debing]

Today, those experts are raising concerns the country may not be building enough new homes to meet demand.

China has seen a surprising turnaround. After hitting a low for the year in the first quarter, the nation's property market has bounced back with a vengeance in the second and, despite July being a traditional off-season for homebuyers, trading and prices have remained robust.

Figures released by the State Development and Reform Commission in cooperation with the National Bureau of Statistics showed that 63 of 70 large and medium-sized cities saw prices for new properties rise in July. The biggest was increase seen in Jinhua, Zhejiang province, which recorded a 3.5 percent shift, followed by 2.7 percent in Guangzhou, capital of Guangdong province, 2.2 percent in its southern neighbor Shenzhen, 2 percent in the coastal city of Ningbo, also Zhejiang, and 1.9 in Dalian, Liaoning province.

Special coverage: Housing in China Related readings:  Housing price up 1.0% in July  East Diaoyutai complex tops Beijing's housing price  Economist predicts housing price rally  Housing price in NW city soars despite slump  Housing price in NW city soars despite slump

The equity price for the first half of this year nearly doubled, according to the Shanghai Composite Index, with many investors choosing to the pump their profits back into the property market.

"A growing number of houses have been sold since February," said Zhou Cheng, sales manager at consultants Kaiyi Investment in Hangzhou, capital of Zhejiang. "And as the media has made a splash about the huge housing supply nationwide, more people have decided to buy because of the prospect the average housing price will continue to rise."

Developers regained their confidence in the market following successful sales in the first half of the year, along with the soaring housing price, said analysts.

A report from DTZ, a leading property information provider, stated 314 million sq m of gross floor area was sold since January, up 33.4 percent year-on-year, and that, by the end of June, 46 percent of the nation's free housing stock was purchased. The report's authors also predicted that if the market maintains its momentum the stock would disappear entirely in the next three months.

Meanwhile, the central government reiterated banks should strictly adhere to the housing policy for purchases of second homes, leading a 4-percent drop in the number of overall transactions in 30 major cities. However, housing prices failed to follow suit.

Analysts have said housing prices will stay at a high level, while property sale fluctuations will continue for the rest of the year.