China's housing market going through natural adjustment

Rocketing rents have hindered development of the service sector, over-investment in the real estate industry has impeded industrial upgrading and skyrocketing house prices have expanded the wealth gap.

The housing issue is also increasingly affecting the lives of China's young generation. Research carried out by the Youth Development and Research Center at the University of International Business and Economics showed that 90 percent of interviewees think their quality of life is related to a house.

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A large number of young city dwellers said they would not get married or have children unless they have their own property.

Cao Honghui, vice-president of the research institute of China Development Bank, said adjustment of the housing market would pose pressure to economic development but will not cause a crash.

"Banks have the ability to bear the pressure even if house prices and turnover volume drops by 30 percent. But we should prevent the risk from dragging on," said Cao.

Wang Xiaoguang said the country should be cautious about a sudden large-scale price decrease, as it would cause a huge impact in a short period of time.

So far, decreases in house prices have only occurred in a few places. Prices in first-tier cities remain at a high level and in secondary markets, price drops happened mostly in cities with high inventory.

Also, at least six cities have loosened controls over the property market to ease the destructive result a sudden decrease might cause.

"China's housing market is most likely to see a drop in sales volume and a price adjustment," Li Daokui predicted. "The adjustment could continue for a few years."