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September 29, 2009

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Concern over property prices

CHINA'S housing authorities do not support high prices and are pushing for an increase in homes that are affordable for most people, a senior official said yesterday.

"We hope local governments will raise the supply of moderately priced housing so that ordinary people can afford to buy their own homes," said Qi Ji, vice minister of the Ministry of Housing and Urban-Rural Development.

Qi said the ministry was aware property prices and sales volume had surged since July. Some developers paid record prices for land and were not willing to sell their finished properties as they expected prices to rise further.

"Of course, we do not support high prices," Qi said at a press conference in response to a questioner who asked whether China's housing market was overheated.

Property prices in 70 major Chinese cities rose 2 percent in August from a year earlier, accelerating for the third straight month.

In the first eight months, the volume of homes sold nationwide jumped 45 percent year on year, while sales value surged 70 percent, according to the National Bureau of Statistics.

Earlier this month, Hong Kong-listed developer China Overseas Land & Investment Ltd acquired a 142,000-square-meter land plot in Shanghai's Putuo District for a record 7 billion yuan (US$1.02 billion). It was the most expensive piece of land sold in the country so far this year, at 22,400 yuan per square meter of gross floor area.

Last month, Shanghai Mayor Han Zheng said another 1,200 hectares of land will be authorized citywide for new residential projects later this year. That will bring the total residential land supply to 1,600 hectares for the whole year, compared with only 700 hectares in 2008.

But even as potential home buyers increasingly complain about high prices, some analysts said the market may cool in the coming months.

"Transactions have remained stable so far this month, which is traditionally a peak season for property buying," said Wei Bo, a senior real estate analyst at Orient Securities Co. "There hasn't been such rapid growth in the number of deals this month compared with previous months. With the favorable policy to end in three months, the market may cool a bit while buyers wait to see where it is heading."

China introduced a series of stimulus policies last year to spur what was then a tepid property market. The policies included lower down payments for first-time home buyers and lower interest rates. The incentives are due to expire by the end of the year.

Shen Li, an analyst at the Shanghai Securities Co, said prices may fall in the last quarter.


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