China’s real estate sector should be more efficient to better meet people’s housing needs, Pan Helin, a post-doc in applied economics from the Chinese Academy of Fiscal Sciences, wrote in the Beijing Youth Daily.
The real estate sector will continue to be a significant contributor to the GDP for a considerable time to come due to the high fixed asset investment, he noted. But despite rapid growth over the last decade, the sector’s proportion in the national GDP stands at less than 7 percent, as compared to over 10 percent in developed countries. China’s real estate sector lacks productivity, he claimed.
As China is investing more in the rental housing market and expanding its cities, the share of real estate in the GDP will keep rising, Pan predicted. But he cautioned that an excessive inflow of capital will also overheat the sector, while exerting a crowding-out effect on the investment in other fields. That said, the high household leverage - 40 percent, comprised mainly of home mortgage – also crowds out household consumption in other sectors, Pan said.
The country should improve the sector’s development and efficiency, stabilize house prices and prevent the sector from overheating, Pan noted.
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