Doing Business in China

Chinese real estate has suffered a stagnation for a long time.Now it is turning hot,sales up,prices soar.Last year,global recession and Chinese government policies to curb overinvestment and market fear of overpricing led to sliding prices and shrinking transactions.

Last October, the central bank authorized banks to offer up to a 30 percent discount in mortgage rates to first-time homebuyers.

In May, the central government lowered the requirement on developers' minimum capital fund from 35 percent to 20 percent of the entire investment needed.

Local governments also made other preferential policies, such as waivers of transaction duties. These incentives triggered a robust round of growth in property sales in major cities this spring.

The China Real Estate Index, the country's largest property research institution, said 18,533 apartments were sold in Beijing in April, up 23 percent from a month earlier, while apartment sales in Shanghai increased 8 percent in April.

"Unlike the previous growth, mainly driven by first-time homebuyers, the recent transaction growth is largely buoyed by rising investment sentiment," said Chen Weiye, a researcher at Shanghai Centaline Property Consultants.

While those who already own their own homes feel lucky, the situation has definitely frustrated the "have-nots".

The China Statistics Yearbook 2008 found that the average home price in Beijing was 23 times a local family's average income, compared with the international level of four to six times.

In Guangzhou, a recent online poll by leading portal Sina.com showed that 78 percent of respondents consider the city's home prices to be far beyond the affordability of ordinary families.

"I just can't understand why our provincial government has issued a string of policies earlier this year to prop up the real estate industry while so many people cannot afford to buy a home," said Yang Anjing, an employee with a consulting firm in Guangzhou.

"To people who haven't bought a home, like me, we really don't know whether we should keep waiting or jump onto the wagon," Yang said.
He is not the only one concerned about the market situation.

In a report on financial stability released last Friday, the central bank said it would "closely monitor price fluctuations in the property market, actively conduct stress tests and impose dynamic evaluations of credit risks related to real property."