BEIJING, April 21 -- China's real estate investment rose 20.2 percent to 279.3 billion yuan (US$35 billion) in the first quarter, 6.5 percentage points slower than over the same period last year, the National Bureau of Statistics said yesterday.

    High prices and an unhealthy investment structure have remained two key issues to be addressed in the real estate sector, Zheng Jingping, the spokesman for the National Bureau of Statistics said.

    Housing prices in Shanghai and Wenzhou have dropped after governments took austere regulatory measures to curb speculation. But prices in Beijing, Dalian and Shenyang of Liaoning Province and other major cities continue to rise, driving the country's average price up, Zheng said.

    Housing prices in 70 cities rose an average of 5.5 percent in the first quarter from a year ago, according to a report released by China's National Development and Reform Commission yesterday.

    Zheng said the investment structure in the sector is still unhealthy due to an insufficient supply of small-sized budget apartments, which is supposed to be the key to solve low-income family's housing problem.

    In China's 24 major cities, less than 50 percent of new apartments are smaller than 120 square meters, according to Zheng.

    Zheng called on local governments at all levels to roll out more preferential policies such as tax incentives to encourage developers to build more small-sized apartments. He also suggested increase the supply of house leasing at low rents.

    "This can ensure everyone has a house to live as it is unnecessary for everyone to own property," he said.

    Meanwhile, an official of China's banking regulatory body warned yesterday that bad loans in the real estate market rose to 109.3 billion yuan last year.

    Even though the amount decreased by more than 21 million yuan from 2004, the number of bad loans in the real estate industry ranked fourth highest of all industries. About 50 percent of real estate investments came from loans, said Sheng Xiaoming, a senior official of the China Banking Regulatory Commission.

    Bad loans comprised 12 percent of all property loans. The bad loan ratio in personal housing mortgages increased to 1.5 percent, Sheng said. Given that most mortgages are long-term and the fluctuation of housing prices, personal mortgages are becoming increasingly risky for banks.

    (Source: Shanghai Daily)