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December 8, 2009

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Purchase of home beyond most families

ABOUT 85 percent of Chinese families cannot afford to buy a home amid a bullish market, according to a report by the Chinese Academy of Social Sciences released yesterday.

"The Blue Book of the 2010 Economy," published in Beijing, attributed rocketing housing prices to local governments' monopoly on land supplies as well as its "weak performance" over the reining in of many greedy developers who hoard property.

Average housing prices in 2009 surged between 5 percent and 10 percent from a year ago and are now between 4,935 yuan (US$722.63) and 5,280 yuan per square meter.

Investment on real estate development from January to August reached 2.11 trillion yuan, up 14.7 percent from a year ago. Total sales volume during the same period was 2.35 trillion yuan, up 69.9 percent from 2008.

The blue book said average house prices should be between three and six times the average annual earnings of a family. However the ratio of 2009 was eight times, "far beyond a reasonable scope," it said.

The prices of 2009 were 22 times migrant workers' earnings and nearly 30 times farmers' income, which kept them from residing in urban areas.

The report said 2010 housing prices might increase slightly but the trend after would largely depend on the government's attitude and policies.

The real estate market would stand at the crossroads in 2010, it said.

Its future would hinge on the government's determination to stabilize housing prices via reforming the real estate and financial systems, it said.

More supplies will be available in the second half of 2010, according to the blue book.

If the government put strict limitations on housing investment or speculation and turned land-acquisition charges into property tax, housing prices would stabilize or even drop a little, it said. This may lead to a surging demand from people wanting to improve their living conditions.

At the same time, the blue book said, speculation would shrink.

It said the government's use of its power to limit land supply and act as the only seller caused fierce developer competition during bidding.

This was the major reason for soaring prices, it said.

Increased supplies and a competitive land supply market could curb surging prices, the blue book suggested.

One scenario it floated as a possible solution was for farmers' collectively owned land to be allowed to enter the market without acquisition by the government in advance.


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