China - Piling housing stockpiles hurts recovery
By the end of October, the country had a total of 133 million square meters of idle apartments and houses, a sharp 13 percent increase from the same period last year.
The vacancy rate is expected to rise further in the fourth quarter and may continue into 2009 as projects under construction are completed and put up for sale.
Economists and policy-makers are very worried that rising stockpiles of housing units would create more troubles for China's anemic economy, which is heading into a substantive slowdown.
The country's gross domestic product (GDP) slowed to 9.0 percent in the third quarter, from 10.1 percent for the first half of the year.
"If the current sales lull continues, the stockpiles of empty units could climb up to 150 to 200 million square meters by the year end," the 21st Century Business Herald quoted Ren Zhiqiang, chairman of Hua Yuan Co, a leading property development company in Beijing, as saying.
The 10-percent or so price decline of housing in most Chinese cities has failed to stimulate the real estate market, because potential homebuyers are pinning their hopes on lower prices, as the worsening global economic crisis could inflict a more negative impact on China, market watchers say.
China's central bank cut the benchmark interest rates by 1.08 percentage point on Wednesday, in a bid to lessen the cost of housing mortgages.
With the real estate industry accounting for roughly a quarter of China's fixed asset investment, the large number of unsold housing units in the country have frozen a sum of 600 billion yuan ($86 billion), cutting into the cash flow of real estate firms, said Professor Nie Meisheng, president of China Real Estate Chamber of Commerce.
The lack of capital all but suffocates the property market which is already afflicted with a decline in demand.
Like the United States, a rising risk in the housing sector has driven Chinese lenders to be exceptionally cautious while loaning money to real estate firms. The banks are now more concerned about their own viability.
Feeling the pinch of the widening world financial meltdown, Beijing appears determined to ward off a collapse in the housing sector and activate home sales, which could affect the consumption of other sectors, including steel, cement, electric appliances and other building materials.
So far at least 18 local and municipal governments in China have introduced fiscal stimulus measures to boost the real estate market. Analysts predict the sector may warm up in the second half of 2009 or the first half of 2010, which, however, still depends on the recovery of the global market.
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