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     BEIJING (MNI) - Property inventories in 80 Chinese cities continued to drop
on an annualized basis in October for the 27th consecutive month, E-house Real
Estate Research Institute said in a report Monday.
     The 80 Chinese cities that E-house monitors reported a 10.1% year-on-year
drop, or 2.1% month-on-month decline, in housing property inventories, at 394.9
million square meters. Properties included in the survey include both
residential and commercial properties. 
     "The inventory scale has dropped to the level four years ago," Yan Yuejin,
director of the Shanghai-based consultancy, said in the report. Yan said the
drop was a reflection of the government's inventory-reduction campaign over the
past three years.
     Cities at all three tier levels saw declines, with inventories in Tier-1
cities down 17.6%, those in Tier-2 cities down 9.6%, and those in Tier-3 cities
also dropping 9.6%.
     Thirteen cities saw y/y inventories grow, while 67 cities saw declines,
showing that inventories need to be boosted in some cities, E-house said.
     Tighter restriction on the issuance of pre-sale licenses to property
developers have weighed on inventories, E-house said.
     In the first 10 months, pre-sale property areas that have been approved by
the government dropped 16.5% y/y to 327.11 million square meters.
     The Chinese government, after a series of measures to clamp down on
skyrocketing housing prices in the red-hot property market including increasing
down payments and imposing housing purchase quotas, has also started to limit
the highest price property developers can set for their newly released property
projects.
     Countrywide, the current stock of new property units could be consumed in
10.8 months, flat with September, but lower than the 12 to 16 months that is
considered a "reasonable range," according to E-house. Inventories in Tier-1
cities are closer to the normal range, at 11.9 months, while those in Tier-2 and
Tier-3 cities are at 10.7 months and 10.9 months, respectively.
     Lower levels of inventories in some lower-tiered cities such as Xuzhou,
Liuzhou, Qingyuan and Maoming have helped fuel housing price growth, according
to Yan.
     The Chinese government has also been restricting credit flowing to the
property market, thus negatively affecting property companies' financing.
Property developers may consider lowering prices under such pressure.
     Given that the government has not yet signaled it might change its policy
direction to stabilize property prices, relatively tight policies over the
issuance of presale licenses should continue, Yan said, with property
inventories continuing to be reined in. 
--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
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