Beijing home prices drop 11% in 2011

Prices for new residential apartments in Beijing are estimated to have dropped by 11.3 percent year on year in 2011, as the government's policies to cool the sizzling property market took hold.

The average price of new apartments in the Chinese capital dropped to 13,173 yuan (2,091 U.S. dollars) per square meter in 2011, when about 78,000 units were sold, the Beijing Real Estate Association reported.

The decline means that Beijing fulfilled its 2011 goal of ensuring that housing prices remain steady or fall, said Chen Zhi, secretary-general of the association.

China's housing market slumped after the government implemented new policies in early 2011 to curb speculation, including increased deposit requirements and second-home purchase restrictions.

According to the association's report, about 90 percent of housing sales went to families who did not own any property, which indicated that the policies have squeezed out speculative capital in the market.

While tightening its grip on the commercial property market, the city boosted the construction of low-income housing projects. A total of 32,000 low-income housing units were sold in 2011, up 38.5 percent from a year earlier.

Chen predicted that sales of low-income housing will continue to rise, as more apartments will soon be available for sale. Beijing started construction on more than 230,000 low-income housing units in 2011.

China's property market took off after the government implemented housing market reforms in 1998. But prices have grown out of control in recent years, especially in the wake of the 2008 financial crisis, when the government implemented a massive stimulus package and ordered banks to flood the market with credit.

To rein in runaway property prices, China's central government in April 2011 started to restrict residents in 43 major cities from buying second or third homes, effectively bringing down property transaction volumes in many cities.

A total of 200,000 homes, both newly built and second-hand, were sold in Beijing in 2011, a 30.1-percent decrease compared with the previous year, according to the association.

Property developers sold just 7.72 million square meters of commercial apartment floor space in the first 11 months of 2011, a 10-year low.

The average price for new commercial apartment prices stood at 22,422 yuan per square meter in 2011, up by 7.8 percent over the previous year, but the increase rate dropped 36.4 percent year-on-year, said the report.

According to the city's statistics bureau, the business climate index for the real estate sector declined for four consecutive quarters, dropping sharply by 12.2 points to 107.2 in the October-December period.

However, Beijing authorities said earlier this month that housing curbs will continue until prices have been brought to "reasonable levels," refuting media reports stating that the government might relax restrictions in 2012.