Real Estate

The number and value of mergers and acquisitions (M&A) in China's real estate sector reached a record high in the first quarter of 2011, amid the government's continuous tightening policies to tame inflation and sky-rocketing housing prices.

A total of 32 M&As were completed between January and March this year, a record high, said China Index Academy, a real estate research institute based in Beijing, in a report on Wednesday.

Twenty-two of those deals had a total value of $1.15 billion, which is nearly half of the total value of last year. The total number of deals also exceeded figures from previous years.

NEW home sales continued to hover around 160,000 square meters in Shanghai for the fourth consecutive week while robust sales of high-end projects pushed up the average price to above 23,000 yuan (US$3,538) per square meter.

Sales of new homes, excluding those built under the city's affordable housing programs, fell 3.5 percent to 161,100 square meters last week, according to a research released yesterday by Shanghai Deovolente Realty. The new homes were sold for an average of 23,464 yuan per square meter, a weekly increase of 16.8 percent.

Rental markets in Chinese cities are becoming hot because of high housing prices and the new restriction policy on property investment.

In Beijing, the rental market's transactions in mid-March grew 22.2 percent year-on-year, up 8.5 percent from ten days before, according to data compiled by the house agency 5i5j.

The average rental price also increased by 16.6 percent year-on-year; the average price now stands at 3,162 yuan ($487) per month.

It was reported rental prices were widely raised in many other Chinese cities during the first quarter by more than 10 percent year-on-year.

According to the Chinese-language newspaper International Finance News, industry insiders and renters have said the soaring price is partly driven by property agencies' promotion of the government's restriction purchasing policy and the current high price for house maintaining fees such as water, electricity and building materials.

China Citic Bank Corp. (0998.HK), the seventh-largest Chinese lender by asssets, warned Wednesday of severe risk in China's real estate market this year and said it plans to cut lending to the sector, in a sign banks could start to feel the impact of government efforts to cool the property market.

"Citic Bank relatively clearly sees that real estate risk this year is severe," said Shi Yuan, the general manager of the bank's risk management section, on a quarterly teleconference. He noted Chinese Premier Wen Jiabao has repeatedly stressed the importance of continuing with the government's property-tightening measures, such as limiting home purchases and raising down-payment requirements.

The remarks come amid signs the government's effort to bring stubbornly high home prices under control are having more effect, and amid concern a drop in prices could put financial pressure on banks.