Chinese Real Estate Sector Soars in 2001

The fast growing real estate sector has become one of the driving forces of China economy in 2001, which indicates the beginning of a new expansion of the sector.

According to the National Bureau of Statistics, funding for real estate development soared 29.7 percent year-on-year to 485.7 billion Yuan in the first 11 months of the year. And the growth rate is 13.5 percentage points higher than that of fixed asset investment. Real estate investment accounted for more than 20 percent of the country's fixed asset investment in the period.

Zeng Peiyan, minister in charge of the State Development Planning Commission, said unlike the bubbles seen in the real estate sector in early 1990s, the sector development in the last two years has been healthy.

Analysts say the bullish housing market has helped push up the real estate sector.

In the last 11 months, land development and newly completed houses increased by 34.8 and 17.6 percent, respectively, on a yearly basis, while unsold buildings were on the decrease, especially since May this year.

The structure of both investment and consumption has also been optimized.

At present, bank loans, corporate financing, bank loans and revenue from down payments and advance sales have become equal sources of funding for real estate development. When the housing bubble burst in 1992-93, bank loans were the major source of funds.

Private housing for individual consumers has replaced commercial buildings and corporate purchase, as a result of the country's housing reform and improving financial services.

Official statistics show that individual consumers purchased 93.4 percent of the houses sold in the first half of the year.

An official with the Ministry of Construction said the real estate market has also benefited from a series of policies adopted by the government to stimulate the domestic demand and encourage investment.

This year, the government has scrapped 40 fees in the real estate sector and used proceeds from treasury bonds to fund the construction of affordable housing for people of low income, which enables more people to buy their own houses.

Despite a mild decline in the second half of 2001, the composite index of the real estate sector has remained higher than one year ago. Demand remains strong in the market as the per capita area of housing in China is expected to increase from 20 square meters to 30 square meters over the next decade.

Industry sources say that to maintain the healthy development of the real estate sector, the government has to improve the consumption environment by adjusting relevant policies and having related financial services improved.

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