‘China property woes more severe than US’

China’s real estate market problems are worse than those in the United States before the global downturn, a central bank adviser has warned.

“It is more than just a bubble problem,” said Mr Li Daokui, a member of the People’s Bank of China’s monetary policy committee.

“The housing market problem in China is actually much, much more fundamental, much bigger than the housing problem in the US and United Kingdom before your financial crisis,” he told London’s Financial Times in an interview published yesterday.

He said recent moves by Beijing to rein in the property market needed to be part of a long-term push to bring high prices under control, the Financial Times reported. The high cost of housing could hamper future growth by slowing urbanization, he said, adding that rising prices might become a political flashpoint, especially among younger people unable to afford their own homes.

China recently introduced a range of measures to forestall a property bubble, including tightened restrictions on pre-sales, higher minimum downpayments for second homes and new curbs on loans for third home purchases.

The measures appear to have the desired effect, with preliminary data showing property sales in Beijing, Shanghai and Shenzhen falling as much as 70 per cent in May from April as developers held back launches. Real estate prices in 70 Chinese cities had jumped 12.8 per cent in April, the fastest year-on-year rise for a single month in five years.

Source : Today – 2 Jun 2010

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