The price of property in China will continue to rise in 2011, but the rate of growth will slow down.

A leading real estate research institute said on Friday that prices will increase by 8 to 9 percent next year, but an improved demand-and-supply relationship, as well as the government's continuing tightening measures, will help to slow the rate of price growth.

"We expect the area sold next year will increase by 8 to 10 percent, and floor space will rise 16 to 24 percent," said Huang Yu, vice-president of the China Index Academy, a Beijing-based property research institute.

"Meanwhile, land prices in areas close to high-speed railways and subways will pick up."

According to the National Bureau of Statistics, China's housing sales value hit 4.23 trillion yuan (US$630 billion) in the first 11 months of this year, a rise of 17.48 percent year-on-year. Guosen Securities expects that the figure for the whole year may reach a record high of 4.7 trillion yuan.

Huang said the structure of housing supply will also affect the property market. "If government-subsidized housing accounts for more than 20 percent of the total property market, prices in the regular residential sector will be weighed down," he added.

Wang Tao, head of China economic research at UBS Securities, said the price-growth trend has been curbed, and prices will gradually stabilize in 2011 as more affordable housing comes onto the market.

In a document sent to local governments, the Ministry of Housing and Urban-Rural Development said the central government plans to provide the market with 10 million units of affordable housing, compared with 5.8 million units for this year. It is expected that the government will need 1.4 trillion yuan to build those 10 million units.

However, such an ambitious target will not be easy to meet. China International Capital Corporation Limited said in a recent research note that only around 80 percent of the target might be achieved.

As residential sector prices are expected to stabilize, more investors, including real estate funds, are focusing on the commercial market.

"Compared with the residential sector which is opposed to frequent policy adjustment, the commercial sector has more investment value," said Su Xin, chairman of Go High Fund, a Beijing-based yuan-denominated private equity fund which specializes in commercial property investment.

The fund has just acquired an office building on Beijing's North 3rd Ring Road from MCC (China Metallurgical Group Corp) Real Estate for nearly 1.9 billion yuan, making it the largest en-bloc deal in the capital this year.

(China Daily December 18, 2010)