Residential property prices in Beijing last year surpassed Shanghai, the country's hottest real estate market, and remained the fastest-growing market in China in January. Analysts, however, indicate this is temporary and general price growth nationwide will gradually slow down.

Industry experts believe increasing fresh housing supply and more economically affordable real estate will soon bring down Beijing's rising prices. Meanwhile, the government's efforts to cool down the real estate market during the previous years and new guidance during its 11th Five-Year Plan period (2006-10) are expected to take effect.

The average housing price in Beijing rose 19.2 per cent to 6,725 yuan (US$830) per square metre last year, compared to 6,698 yuan (US$827) in Shanghai - an increase of 4.9 per cent from the previous year with the growth slowing by 9.7 percentage points, according to statistics bureaus of the two municipalities.

Sources from the National Bureau of Statistics showed price ascension of Beijing's residential property rose 8.4 per cent year-on-year in January, the top among China's major cities.

Insiders pointed out that Beijing's sharp augment and Shanghai's dip are closely related with the implementation of macro-control policies and market supply structure.

From the second quarter of 2005, Shanghai municipal government's strengthened macro-economic controls significantly affected the city's property market, with more investors preferring to take a wait-and-see attitude, according to Yue Fenggang, an analyst with property consulting firm Debenham Tie Leung DTZ.

Last year, residential property trading volume fell 12 per cent from 2004 in the East China metropolis.

Shanghai's property developers experienced a slowdown in their operations, as property development investment growth was 6.1 per cent in 2005, down 24.3 percentage points from 2004. Rights to raw land sold last year totalled 7.54 million square metres, down 27.4 per cent.

Meanwhile, sales of the ordinary and economy houses chalked up 8.5 million square metres in Shanghai, accounting for nearly 30 per cent of the city's residential real estate trading as a whole.

Beijing sold a total of 21.52 million square metres of commodity housing, 14 per cent of which was considered economically affordable property.

"The relatively higher proportion of ecumenical housing at Shanghai's residential market dragged down the average price," said Yue.

An official of Beijing Land Bureau, who wanted to remain anonymous, told China Daily that Beijing's sharp prices will not continue for much longer this year.

Last year's condition was partly due to sluggish interim supply.

"As housing production has a long production period, the supply on the real estate market shows a strong inertia, potential supply capacity accumulated since 2004 will successively be completed this spring, therefore, the price growth is to slide down," the official said.

The official disclosed that, in order to meet the demand for housing by vast medium- and low-income buyers, a larger part of the market supply would have to be ordinary and economy houses.

Source: China Daily