China's realty business still see better days ahead

Home>>Business

Last updated at: (Beijing Time) Monday, November 03, 2003

China's realty business still see better days ahead

During the 6 years from 1997 to 2002 the growth rate of the real estate indicated by and large normal, being 2.1 times that of the national economy except in some odd years in which it grew a bit faster.

DISCUSSION

CHINESE

SEND TO FRIEND

The scope and scale in which the growth of real estate is permitted within the bracket of national economy is measured mainly in the following four aspects, namely the capital, the land, goods and materials and the purchasing power of consumers.

For the moment, the investment increase in China's realty business is still within the scope and scale permitted by the development of the national economy. 1992 saw the growth rate of the national economy registered at 14.2 percent while the growth rate of the real estate was 117.6 percent in the corresponding period. 1993 witnessed the growth rates of the both to register respectively at 13.5 and 165 percent, in which the growth rate of real estate was 12.2 times that of the national economy, hence the conclusion that China's realty business was overheated in some areas. However, during the 6 years from 1997 to 2002 the growth rate of the real estate indicated by and large normal, being 2.1 times that of the national economy except in some odd years in which it grew a bit faster.

Judging from the sales rate as against that of investment the increase of sales shows a distinctive higher rate than that of investment during the last 6 years. With the consumption to motivate the investment it has indicated a favorable tendency. In 1997, there occurred a negative growth in the real estate sales in China and the growth rate of investment witnessed less than 10 percent. However, along with the incoming of 1998 the sales value rose to 39.7 percent while the corresponding investment rate was pumped up to 13.4 percent. The sales rate in 2000 was 30.1 percent with the investment rate to show 19.1 percent and the two of them varied respectively to 23.7 and 21 percent in 2002. In view of the development situation the sales volume of real estate is higher than the investment and is gradually nearing to a balance. This shows a relatively normal tendency. Nevertheless, special attention must be paid to the prevention of an occurrence in which the investment rate is higher than that of the sales, pointed out Zhang Yuanduan, and moderate control has to be laid on the investment for realty business.

Vacancy, a direct index for judging real estate business

We've made a comparison between the floor space completed and that of the sold out. There occurred in a period of time in which the yearly completion of floor space was larger than that sold out while the vacant houses and apartments are increasing year on year. This is the biggest problem that the real estate market is confronting in China. The relevant statistics indicate, this year told a room vacancy of 96 million square meters, a seemingly astonishing number.

However, it's not sufficient to jump to a conclusion of "overheating" only by the number of room vacancy in real estate business. In view of the market operation, to regulate the high risk of the realty market, put a check on the possible price-rise and dispose the needs at the market, all require that there is a certain proportion of vacant rooms in the market. This is a normal state of the things running. On the contrary, the abnormal state of room-vacancy is not incurred by the "overheating". For instance, the inaccurate judgement and blind chasing after the goings-on of the developers that led to a structural vacancy of rooms or that instigated by the commercial apartments and prices not quite suitable for the needs.

A proper definition can be given to the so-called vacant rooms according to the duration of the vacancy time. Vacant rooms in the hands of the developers or agents for sale within a year may be regarded as rooms waiting to be sold, within 1 - 3 years as something in stagnation and over 3 years as overstocking. Aside from all these it still depends on whether the overstocked apartments are adaptable to the needs and whether the prices are all right or not. The increase rate of the real estate should be kept at 7.3 - 8 percent as against the increase, namely 2 times that of the increase of the national economy and in this way the realty business will see a harmonious development in China.

No long-term saturation for real estate market within 20 years to come

When an overstocking number of limited vacant rooms appear in the market, we may consider it to be the "overheated" situation or as oversupply and saturation in real estate market. The realty saturation consists more often than not of long-term, short-term, structural and lively holding-up, the four kinds and no more else.

Due to the sustainable development of the national economy and the incessant enhancement of the urbanization, ceaseless improvement of residences for inhabitants and the stepped-up city construction, these are the four major pillars for the development of the real estate business in China. Therefore, in the 20 year to come there is no such thing to occur as the long-term saturation of the real estate market in China. However, attention must be paid to the short-term, structural saturation and lively holding-up and so on. With regard to this, the government and the developers must pay attention to the adjustment of product structure, increase effective supply so as to make the sales cater to the needs when controlling and adjusting the putting up of residences.

(Article by Vice President and Secretary-general of China Real Estate and Residence Research Institution, Source: People's Daily Online - "People's Daily Overseas Edition" & Trans by R .L Han)

Questions?Comments? Click here

Risks increase as China's real estate bulls run

Real estate becomes mainstay of China's economy

China's Booming Real Estate to Offer More Jobs

Global survey: Chinese women sexiest ( 11 Messages)

Business Week: Is China's boom in danger? ( 3 Messages)

Chinese gov't opposes Taiwan's separatism, referendum ( 7 Messages)

China pays last tribute to Madame Soong Mei-ling ( 3 Messages)

China expects to see trade deficit in near future: official ( 2 Messages)