The final ministrial level press conference during this year's two sessions was held today. The minister of Housing and Urban-Rural Development -- Chen Zhenggao -- briefed the public on China's real estate market.
Chen said the market will continue to experience steady, healthy development and that it won't collapse as Japan's did in the 1990s.
After a year-long decrease in home sales in 2014, China's real estate market has experienced a rebound since last year. The sales area increased 6.5 percent and sales volume was up more than 14 percent by the end of 2015. Officials from the Ministry of Housing and Urban-Rural development said during a press conference that the market is warming up. But challenges are also looming.
Clearing out excess capacity remains the ministry's priority. Its experts say the process will likely take as much as five years according to the current pace. However, recent home price increases across China's first- and second-tier cities are adding an extra layer of difficulty to the uphill battle.
"There is a serious stratification going on between home prices for first-tier and third- and fourth-tier cities, and it is getting more serious by the day. This is a challenge to our macro-management," said Chen Zhenggao, Minister, Ministry of Housing & Urban-Rural Dev..
That's hardly an overstatement. While the ministry works to keep prices stable in big cities, smaller towns are finding their inventories hard to sell. The country's inventory level reached 718 million square meters by the end of last year, up 15.6 percent year on year. Officials, however, say they are confident that the excess can be digested, given the Chinese economy is expected to grow 6.5 to 7 percent this year. Strong economic fundamentals can generate strong demand.
"China is still going through urbanization. There are now 770 million people living in cities. The urbanization rate is expected to reach 60 percent from today's 56 percent during the 13th five-year plan period. Such a large-scale transition will provide the real estate sector with huge growing opportunities," Chen said.
The minister says migrant rural residents are becoming a larger group of home buyers throughout China. They could make up as much as 30 percent of the buyers in China's smaller cities.
