The China Real Estate Index edged down 0.05 percent to 106.28 points in May, the National Bureau of Statistics reported yesterday. It was the third consecutive month that the index had declined.

The benchmark achieved a record high of 109 points in February.

The bureau attributed the fall to the central government's tightened control over land since last December when it banned further land leasing for villa projects.

During the first five months of 2003, the price of average houses nationwide rose 9 percent year-on-year to reach 2,289 yuan (US$275.78) per square meter. About 280 billion yuan was invested, an increase of 32.9 percent year-on-year.

However, the gains were offset mainly by the growing amount of unsold finished apartments. The category increased by 9.2 percent from a year ago in the first five months. The figure is widely considered as a gauge for bubbles in the property industry.

The area of newly purchased land and newly kicked-off projects, which reflects the current momentum of the industry, also witnessed a decline.

"The housing demand remains large, but mainly at the low-end. To generate more profit, most developers rush to the high end," said Deng Wei, an analyst at the property research center of the Shanghai University of Finance and Economics. A total of 48 million square meters of new houses nationwide was completed in the first five months, up 40.9 percent.

No figures for housing sales were available. Domestic banks issued loans of 119.7 billion yuan to developers during the period, up 51.3 percent from the same period last year.

The central bank announced on Friday it would step up its control over housing loans both for developers and buyers. Deng said it is unlikely the index will head further south.

"The new rule will curb development nationwide. But for Shanghai, the flourishing foreign investment and growing economy guarantee growing demand," Deng said.

(Shanghai Daily June 19, 2003)