Vanke warns of bubble bursting

PUBLISHED : Wednesday, 20 June, 2007, 12:00am
UPDATED : Wednesday, 20 June, 2007, 12:00am

China Vanke, the country's biggest listed developer, has become the first leading property company to warn of a bubble in the mainland market, saying it could burst within two years.

'Housing prices in China are rising too fast and there are bubbles that will burst sooner or later,' Wang Shi, the chairman of Vanke, told the Shanghai Securities News yesterday.

Housing prices in several cities have soared, fuelling concern homes are now out of the reach of average citizens and forcing the government to introduce a series of measures to cool the market.

Shanghai last week said it would extend the land appreciation tax to individual property owners who sell their luxury flats within five years of buying them.

Vanke's warning came after the government said its property outlook index, which indicates trends in property investment and space usage, was continuing to rise.

The National Bureau of Statistics said the index rose to 103.32 last month from 102.65 in April. The measure hit 108 in 2004, the highest point in three years.

Shanghai Securities News reported that Vanke had already taken steps to prepare for a possible collapse in the market.

Oscar Choi, a property analyst with DBS Vickers Securities, said he agreed with the bubble warning, pointing out that some property valuations were ridiculous.

'Sure, there are bubbles in the sector, especially in cities such as Hangzhou and Shenzhen,' said Mr Choi, who covers Hong Kong-listed mainland property developers. 'High-end residential projects are ridiculously expensive and the curbing measures by the government have not been showing enough effect.'

Housing prices in 70 big and medium-sized cities rose 6.4 per cent last month compared with an increase of 5.4 per cent in April. Beijing housing prices climbed 9.6 per cent while those in Shenzhen surged 14.2 per cent.