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Home prices 'to fall later this year'

By Chen Jia (China Daily)
Updated: 2009-04-24 08:22

House prices are expected to fall later this year following a drop in sales, according to the Blue Book of Real Estate 2009 released by the Chinese Academy of Social Sciences (CASS) on Thursday.

"Last year was the most gloomy period for China's real estate market since housing reform in 1998, in face of the global economic downturn," said Li Jingguo, director of the research center for urban development and environment under the CASS.

The volume of housing sales fell by 19.7 percent last year, the report said.

Special Coverage: Housing in China Related readings:  Housing prices may 'fall sharply'  Housing price in NW city soars  Weak demand affects retail property in Beijing  China's property investment up 4.1% in Q1

However, the average price of a home increased by 6.5 percent, it said.

The unusual phenomenon of rising prices and falling transactions indicates an "unhealthy development" in the property sector, Li said.

"Clinging to the hope that the government will roll out some rescue measures to reboot the market, real estate developers are reluctant to lower prices in tune with the market demand contraction," he said.

Meanwhile, many consumers postponed plans to buy because of fears about a stable income in the face of the economic crisis, he said.

He also said that opportunistic investments on property fell last year over fears of a diminishing profit margin,

Potential home buyers talk to a salesman during a housing trade fair in Beijing, April 9, 2009. [China Daily]

The Blue Book forecasts a rebound in sales volume for houses because many developers will be forced to slash housing prices to ensure a smooth capital flow.

In addition, a national welfare-housing program will help stabilize the housing and real estate industry.

The welfare-housing plan, listed on top of the country's stimulus package, will benefit low-income people who could not afford the commercial housing.

"Our company's researches show the same result as the Blue Book's prediction; that a warming real estate market would come in the second half of this year," said Wang Yi, secretary to the board of directors with the Beijing Capital Development Co Ltd.

"But I don't think a big decrease on price would happen in Beijing's real estate market this year," he added.

Zhu Zhongyi, vice-chairman of China Real Estate Association, said a healthy property market calls for a reasonable growth in prices.

"We need to find a balance between the consumers anticipation and sellers benefit."

The real estate industry has seen a huge gap between prices in some regions and big cities.

"Though the developers of real estate always give discounts in their advertisement, I still could not afford the down-payment for an apartment in Beijing," said Zhu Rui, a 26-year-old public servant in Beijing.

"The government should control sky-rocketing housing prices. My friends who live in some middle or small cities can buy a house, even though their incomes are much lower than mine," she added.