[photopress:china_housing.jpg,full,alignright]In May, housing prices rose by 6.4% which is the fastest year-on-year monthly increase in 18 months. Yet again, the real estate market is showing how the economy is galloping ahead of both the government’s and the market’s expectations.
Now The World Bank and Morgan Stanley have revised their growth forecasts for 2007 upwards to above 10%.
At the start of this year the general consensus of opinion was the growth would be under, but not very much under, 10%. The first quarter was 11.1% and there are signs of accelerating growth.
Qing Wang, of Morgan Stanley, said, ‘The latest data indicate buoyant activity in almost every aspect of the economy, including investment, retail sales, external trade, and industrial production.’
For the government this is disturbing. The World Bank said in its last China economic report that heavy industry investment remained high ‘under a policy setting that underprices . . . land, energy, resources and the environment’.
Housing prices reflect this. The market appears to ignore the much publicised policy initiatives from Beijing to cool prices.
Jason Yang, of Colliers International in Beijing, said, ‘Given the current market situation and the government’s attempts to slow housing price rises, this increase is really shocking. If the government really wants to lower property prices, it should increase land supply for the middle and lower-range market segment.’
That is a narrow real estate perspective and ignores the genuine fears that real estate projects are eating into the country’s declining stocks of arable land which are now close to a critical figure. This is not a problem that can easily be solved by just appeasing the demands of the real estate developers at any level. Expect more moves by the government to take some of the heat out of the economy.
Source: Financial Times