Harsh property measures to benefit Chinese economy in long-term

BEIJING, May 3 (Xinhua): China's booming property market suddenly cooled down in April - in home sales at least - after a range of government measures aimed at curb rocketing house prices.
However, the long-anticipated cooling fueled concerns the measures will also derail growth in the world's third largest economy, already beset by export uncertainties.
Zuo Xiaolei, chief economist at China Galaxy Securities, said property bubbles may be the major risk for the economy this year.
"The government has to move before the bubble bursts and destroys the economy," she said.
In April, the Chinese government introduced a raft of tough measures, including more restrictive down-payment requirements, higher loan rates, a ban on lending for third home purchases and tighter scrutiny of developers' financing.
Zuo said the measures sent a clear signal about the government's determination to check runaway property prices, which surged a record 11.7 per cent in March, prompting complaints and intensified concerns about asset bubbles.
Hit by the measures, property sales in major cities tumbled.
Data from the China Index Research Institute showed Hangzhou, capital of eastern Zhejiang Province, saw a 72.55 per cent month- on-month plunge in the area of properties sold during the week ending April 25. Beijing witnessed a 45 per cent fall while in Shanghai the drop was 38 per cent.
The measures have help stabilize home prices, but whether the measures will deflate the bubble as hoped depends on implementation, she said.
Zhang Hanya, a senior researcher with the investment institution of the National Development and Reform Commission, echoed the view, saying local governments rolling out measures tailored to their situation is the key.
Real estate is important to the Chinese economy. As a pillar industry, it also affects 60 other sectors including cement, steel and home appliances. Some have likened the entwinement to "kidnapping."
Real estate accounts for 18 per cent of China's fixed-asset investment, which in turn contributes about 57.9 per cent of the nation's gross domestic product.
The close ties have prompted fears any tightening measures will hinder economic growth.
The country's stock market, in reaction to the recent measures, has plunged.