The government will continue to regulate land supply for real estate development this year but has promised to allocate more land parcels for economical housing for low-income families, according to an official from the Ministry of Land and Resources.

Yuan Xiaosu, vice-minister of land and resources, urged local governments to stop selling land to investors at low prices, in a bid to protect the country's limited land resources, according to a Xinhua report on February 4.

He said the government would continuously protect primary farmland and prevent misuse and illegal occupation of farmland so as to ensure the country's grain security.

But Yuan said the government plans to supply more land to construct low-cost housing in an effort to satisfy growing needs and mitigate the effects of rising real estate prices.

"We are still facing the demanding task of regulating land supply in 2006 to keep land and real estate prices stable," Yuan said.

Construction Minister Wang Guangtao added that the government has managed to control the overheated investment in the country's real estate sector in 2005.

"More real estate development will be on arable land," Wang said. "And that will cause some concern over grain safety," he warned.

Through the urbanization and modernization of rural regions, more people are planning to or have bought or built more spacious homes.

Per capita living space in cities increased from 20 square meters in 2000 to 25 square meters last year. The figure is 40 in the United States, 38 in Germany, and 30 in Japan and Singapore.

Wang said that housing supply in the country is unbalanced, with insufficient lower-priced, smaller houses for low-income families.

China's real estate market has been experiencing a major growth in some regions since 2002 with house prices increasing at around 15 percent annually on average.

In August 2004, the central government started to tighten land and loan supply to curb the trend.

"Measures will continue this year because development is constrained by a land shortage," Wang said.

Wang said the real estate sector in 2005 saw a year-on-year increase of 21 percent.

Statistics from the National Development and Reform Commission (NDRC) indicated that real estate prices nationwide posted a 6.5 percent year-on-year increase on average in the last quarter of 2005.

This equates to slowed growth compared with 10.1 percent in the first half, and 12.5 percent in the first quarter of the year.

In spite of the slowdown in price increases, ordinary households in China need to work for years to satisfy their housing needs.

According to current income standards, the World Bank believes that the average household, worldwide, can earn enough money to buy an apartment in five years. But in China, that figure is 12 years for the average urban family.

"The government should take measures to lower house prices," Xiao Zhuoji said, a renowned economist with Peking University.

Xiao said the government should take measures to cap land transfer fees and the profits of real estate developers. "The fees and high profits have pushed real estate prices way up," Xiao said.

He said rates of profit in China's real estate sector averaged 40 percent.

(China Daily February 6, 2006)