Slide in price of housing speeds up

THE cost of second-hand housing in Shanghai is dropping rapidly.

Prices are falling because of government measures to curb lending and halt rampant speculation in a too-hot real-estate market.

Shanghai's benchmark index for second-hand housing prices recorded the biggest drop last month in a downward trend that started last June and accelerated before the Spring Festival.

The index, which tracks the price and sales volume of Shanghai's preowned housing, fell to 1625 in January, down 22 points, or 1.3 percent, from the previous month, the Shanghai Existing Property Index Office reported yesterday.

The index started dropping 0.6 percent each month on average last June when the government undertook strict measures to limit the overheated market. Many investors have chosen to lease property to avoid a 5 percent fee on the value of an apartment sold within 24 months of ownership.

A wave of speculators flooded the real-estate market from the second half of 2004 to the first half of last year, driving housing prices to an unprecedented high. Weak demand for new property loans caused by stagnant sales kept the city's individual mortgage loan growth dipping in the second half of 2005.

It said individual mortgage loans, a barometer of activity in the residential property market, gained 19.94 billion yuan (US$2.4 billion) in 2005, 52.9 billion yuan less than the growth in 2004.

The central bank expects Shanghai's GDP growth to slow to 10 percent this year at a time of slowing growth of fixed assets investment and the property sector. The city's economy expanded 11.1 percent in 2005.

(Source: Shanghai Daily net, 2006-2-14)