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House Prices in China Set to Drop, But That's a Good Thing

By Allison Halliday | October 6, 2011

The government in China has spent much of the last two years trying to cool its real estate market, and now it looks as if it is paying dividends as many prospective homeowners could be about to find housing more affordable, according to a news report.

China real estate

China hopes its real estate will soon become more affordable © olly -

Home sales are down in many cities, and developers are struggling due to higher borrowing costs. Experts think they may soon be forced to cut their prices as the government has no intention of relinquishing its steely grip on the real estate market as it has already introduced purchase limits in some cities and reduced liquidity. In addition it has introduced higher deposits and has accelerated the construction of low income housing projects.

During the first two weeks of September, 2,056 new units were sold in Beijing, which is 16% less than the first two weeks of August and 33% less than the latter half of the month. Around 13,000 new and resale units were sold in August, which is the lowest amount since 2009, while prices of new homes decreased by 2.5% from July. Prices of resale homes dropped 0.9% in August in Beijing. Sales were also sluggish in Shanghai and Shenzhen. Property prices in other cities have finally started to fall and figures from the National Bureau of Statistics show that 46 cities out of 70 saw prices of new homes decline or remain static in August, compared to just 31 cities in July.

Earlier in the year the government announced it would build 36 million low income housing units by 2015, and said it expects 10 million to be constructed this year. These low income units will account for around 20% of the Chinese housing market, something which is hoped will bring about a healthier market. During the first eight months of the year local governments began building or renovating 8.68 million subsidized housing units which should ease the housing shortage bringing more homes within the reach of ordinary people.

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.
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