March 05,2010

Distorted Housing Price Statistics Stir Anger over Policy

By CSC staff, Shanghai

China's economic and business statistics have been notoriously inconsistent, unreliable,

and often and apparently manipulated. Now it seems that the statistics concerning housing prices are no exception.


The National Bureau of Statistics (NBS) has released news that housing sales prices rose a mere 1.5% in 70 cities in 2009. Incredulous Chinese swear that the decimal point has been misplaced--15% would be closer to the mark. The reported statistics have been widely and harshly lambasted by media and representatives of China's two big-time annual meetings, the National People's Congress and the Chinese People's Political Consultative Conference. China's soaring land and property prices have been in the papers for over a year. Fewer and fewer urban residents can afford new housing, and public anger at absurd prices is turning on real estate developers and the government.


High prices and a growing income distribution gap are heated topics in the conventions, and who knows but that the government may be forced to introduce policies to deal with them. But real estate developers and local governments constitute a strong lobby, and the real estate industry plays a key role in economic growth and the stimulation of domestic demand. Rising real estate prices may slow but will not significantly decrease, while the government will look to introduce a policy favoring more affordable housing.


The NBS's 2009 National Economic and Social Development Statistics Bulletin claims that in 2009 China's housing prices in 70 major cities rose 1.5% compared to 2008, less than a quarter of the average gain in the previous four years, the lowest for nine years.


On February 19, however, six days before the release of its report, the NBS announced that housing prices in the national real estate market in 2009 had increased by 24%.


Last year, commercial housing sales area reportedly reached 937.13 million square meters for a total amount of 4399.5 billion yuan, at 4695 yuan/square meter. In 2008 the commercial housing sold at an average 3882 yuan/square meter. If the housing prices rose only 1.5%, the earnings were less even than the one-year deposit interest rate. It is difficult to understand that house prices rose so minimally with substantially increasing profits for the construction and real estate industries.


Even according to the NBS stats, from 2005 to 2008, in 70 cities the average housing sales price index rose 7.6%, 5.5%, 7.6%, 6.5%, respectively. 2009 was a crazier year for China's real estate industry than any of those preceding it.


Based on the average house selling price (= housing sales/housing sales area), in 2009 the national average sales price of commercial housing was 4694.6 yuan per square meter, up 21.09% year on year, not 1.5%.


NBS chief Ma Jiantang admits that data mainly rely on information provided by real estate companies. But he goes on to say that "housing prices in early 2009 fell by 16% over the previous year, but rose by 18% by the end of year. The average price rise was only 1% compared to 2008."


Data mainly from the industry as well as relevant government departments has been known to suffer manipulation to meet performance needs. It is impossible to discern whether it is true or not. Ma says the NBS will improve to address these issues.


According to information from the Land and Resource Ministry, in 2009 the average cost of China's urban commercial housing was about 2,500 yuan/square meter. It can be roughly calculated that in 2009, China's real estate business profit totaled up to 1 trillion yuan. Well-known low-profit developer Vanke, for example, reaped a profit of 1,082 yuan/square meter in Chongqing last year, with a 25% profit margin. The average per meter price of commercial housing in Chongqing last year was about 4,000 yuan.


A report from Cushman & Wakefield, a commercial real estate services firm, says China has become the world's largest real estate investment market. Investment grew 143% last year, reaching $156.2 billion. Although the central government has tried to cool the property market, investment growth looks to continue to remain strong.


The report says that the global real estate investment fell 23% to $365 billion in 2009, the lowest since 2003. Benefitting from recovery in the US market, it is expected that global real estate investment this year will increase by 30%, reaching $ 478 billion.



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