Vacant space in China's commercial real estate sector was up 5.3 percent year-on-year during the first quarter of this year to 90.08 million square meters, the National Bureau of Statistics said Thursday.

"Although the growth rate slowed from the same period last year, it was still much faster than the average growth rate of 2.2 percent for 2003," the bureau said in a statement.

The amount of floor space which went unsold for more than three years stood at 11.38 million square meters, accounting for 12.6 percent of the total, it said.

Economists attributed increasing vacant space to real estate investment growing too fast, as well as high prices.

During the January-March period, total investment in commercial real estate reached 182 billion yuan (US$21.9 billion), an increase of 41.4 percent compared with a year ago.

Investment in residential homes rose 35.9 percent to 120.3 billion yuan (US$14.5 billion), while investment in office space rose 68 percent to 9.4 billion yuan (US$1.1 billion).

A total of 36.81 million square meters of commercial real estate were built during the period, an increase of 45.8 percent.

But higher prices have kept many people out of the market.

The average price for commercial real estate was 2,677 yuan (US$322.5) per square meter, an increase of 6.7 percent, while the average price for residential real estate rose 6.5 percent to 2,481 yuan (US$298.9) per square meter.

Commercial residential housing in Shanghai, East China, witnessed a year-on-year increase of about 30 percent during the first quarter, the fastest growth among the country's 35 major cities.

The State Development and Reform Commission, which has closely monitored housing prices in the 35 cities, said earlier housing prices in 10 cities had gone up by at least 10 percent during the January-March period.

But prices in Beijing, well-known for being comparatively expensive, remained stable with only a 1.8 percent year-on-year increase during the same period.

In Shanghai, the government has already taken measures to curb rapid price increases, according to Cai Yutian, director of the Shanghai Administration of Housing, Land and Resources.

He said Shanghai will learn from Hong Kong's experience in controlling the real estate market, with the government intervening in and limiting the trade of commercial real estate before owners obtain housing permits.

As China's economic powerhouse, Shanghai has observed soaring housing prices in recent years.

Its commercial housing prices topped 5,118 yuan (US$617) per square meter last year, about 24.2 percent or 1,000 yuan (US$120.5) up from the previous year.

Rising prices across the country sparked interest among economists and officials who thought it might cause problems for the healthy development of the industry and the country's economy as a whole.

Yang Shen, chairman of the China Real Estate Association, said tougher measures should be put in place to ward off risks in China's bullish real estate sector despite housing demand remaining strong.

The central bank has already taken a series of measures to cool down the industry, said Wang Zhao, a researcher with the Development Research Center.

The central bank is now requiring commercial banks to limit lending to real estate developers, beef up credit management and increase the downpayment for buyers of second homes and luxury homes.

Analysts from real estate consultancy firm Jones Lang Lasalle said the new policy mainly targets poor-quality and low-credit real estate developers as well as the high-end housing market segment.

They point to the large number of non-performing loans and high luxury housing vacancy as responsible for triggering the price hike.

Li Yang, a senior economist with the Chinese Academy of Social Sciences, said the new policy is aimed at helping more people buy homes suited to their tastes and budgets.

New monetary policy usually focuses on the interests of ordinary people first rather than real estate developers, he said.

(China Daily April 23, 2004)