Beijing to continue property price-controlling efforts
Province
SHANGHAI — China faces a potential property “bubble” whose bursting could leave banks with huge losses, the central bank said in a report signalling that efforts to curb rising real-estate prices will continue.
Average real-estate prices in China rose by 14.4 per cent in 2004 over the previous year and by 12.5 per cent in the first quarter of 2005.
Prices in cities like Shanghai have risen still faster, although they have moderated in recent months following government moves to cool the property boom.
“Property price inflation can easily result in prices soaring out of line with real values and thus cause a bubble,” said the report, posted on the website of the People’s Bank of China. “Once the bubble bursts, it can cause a contraction in the real-estate sector and significant losses for banks.”
Alarmed by signs that ordinary citizens have been priced out of the market, China‘s leaders have made controlling property prices part of their strategy of reaching out to families left behind in the country’s rush to affluence.
In a weekend tour in northeastern China, Vice-Premier Zeng Peiyan visited both a real-estate project and a shantytown. “Maintaining the healthy development of the property market has a crucial bearing on national economic and social development and on the immediate interests of the broad masses of the people,” Zeng was quoted as saying.
This spring, the government began acting to curb speculative real-estate investment that it says has pushed prices to unsustainable levels. Local governments, such as Shanghai, boosted taxes on real-estate transactions and ordered banks to limit credit for property deals, among other measures.
Zeng urged continued efforts to curb speculative demand and increase construction of affordable housing.
Given those developments, property developers’ shares slipped yesterday. China Merchants Property Development Co.’s shares fell 2.2 per cent and China Vanke Co. declined 2.6 per cent.
“It’s not possible that this is a one-day fall. It’s likely to continue for quite some time,” said Grace Lin, an analyst at CSC International Holdings.
The central bank’s report focused mainly on the financial risks from the property sector. It noted that housing loans, including those to property developers, stood at 2.6 trillion yuan ($310 billion US) at the end of 2004, accounting for about 15 per cent of all yuan-denominated loans.
© The Vancouver Province 2005
