China races to build cheap homes

China started building 3.4 million units of government-subsidised houses at the end of last month, state television said on Monday, meeting a third of its target to build more cheap homes as property prices cling to record levels.

Worried that soaring house prices could rouse social unrest, Beijing wants to build more affordable housing to rein in property inflation, the second biggest driver of consumer inflation after food.

It will build 10 million units of government-subsidised homes this year and has ordered local governments to break ground for all of them by the end of October.

There was talk in local media that the construction of affordable homes had fallen behind schedule due to a lack of funding. But the government said the pace of building had picked up from 2010.

Last year, the government said it met its goal of starting building construction of 5.8 million affordable housing units, improving from a record of repeated failures in previous years.

A shortage of homes, a swelling class of middle-income earners and a preference among local investors to invest their savings in property have driven up Chinese house prices even though Beijing is cracking down on the market.

That has led some investors to worry that China is inflating a property bubble that could destabilise the world's second largest growth engine when it bursts.

China's property development investments rose 34.6% during the first five months of this year to 1.8737 trillion yuan, according to the National Bureau of Statistics. - By The Star

1 comment

June 15, 2011 at 4:38 PMObserver

This is a good sign but bad sign to the speculators & investors. China will build 10 million units for 2011 alone. Penang should start work to build at least 100,000 units as soon as possible before election. Speculators, you better quickily dump your units now especially those bought by bulk, otherwise it will be too late for you to do so and you will get the severe burn this time around.