Stocking up on housing supply is a persistent ailment of China's real estate industry because it also drives up housing prices, commented the Economic Observer, a Beijing-based business weekly.

Soaring housing prices in Shenzhen, Guangzhou and Beijing have played a leading role in pushing up the general housing price of the country in recent years, with one of the root causes being a great deal of idle land. At present, there are 20 square km of idle land in Shenzhen, which is the most important reason for its high housing price. Most of the idle land withdrawn by Guangzhou early this year was approved for construction as early as the 1990s, left unused for more than 10 years.

A joint 2005 survey of seven ministries and commissions of the State Council, including the Ministry of Construction and the Ministry of Land and Resources, indicated that the total land area of Beijing under control of real estate developers is enough for 10 years' use. According to statistics provided by the Land and Resources Bureau of Beijing, the area with construction completed by the end of June 2006 accounted for only 12 percent of this total. The 30 million square meters of undeveloped residential land held by real estate developers and the 80 million square meters of planned land almost add up to the total selling area of houses in Beijing for four years.

One article in the Economic Observer said that all efforts must be made to prevent the stockpiling of new houses, or else developers could create a false appearance of demand exceeding supply to maintain the rising momentum of the housing price and offset the macro control policy of the government.

New policies will be issued to convert the land supply to commercial housing supply, and especially to enhance the supply of plain commercial housing after the seventh inspection of land use, according to sources with the Ministry of Land and Resources.

Restrictions on foreign capital relaxed?

Many scholars and industry insiders predict that restrictions on foreign capital may be relaxed with the strengthening of macro control measures of China's real estate industry over the housing supply. That's because many real estate enterprises have turned to foreign capital rather than bank loans beginning last year, when a tighter monetary policy was adopted.

Six Ministries of the State Council including the Ministry of Construction jointly issued the No.171 Document to enforce the third real estate macro control measure in 2006, setting many restrictions on foreign capital entering the Chinese market and dissatisfying many foreign investors and real estate joint ventures.

The total foreign capital entering the real estate industry of China's mainland reached HK$157.747 billion in 2006, shooting up 33 percent year on year, according to a report of the property market in the Asia-Pacific region in 2006 released by DTZ Debenham Tie Leung, an international property adviser, on February 5.

All signs at present suggest that large overseas real estate developers and some investment banks put high hopes on the Chinese market due to their upbeat projections for the Chinese property market and expectations of the renminbi's appreciation.