Property prices climb 2pc in mainland cities

PUBLISHED : Friday, 11 September, 2009, 12:00am
UPDATED : Friday, 11 September, 2009, 12:00am

Property prices in 70 large and mid-sized cities on the mainland rose 2 per cent in August from a year earlier as sales and investment grew under government policy support.

Last month's gain, up from 1 per cent in July, was the third consecutive monthly year-on-year rise after seven months of declines.

Meanwhile, locally listed red chip China Overseas Land & Investment yesterday paid seven billion yuan (HK$7.94 billion) for a plot of land in Shanghai in the country's biggest land transaction this year, according to

Sherman Chan, an economist with Moody's, said the mainland's real estate market was improving in line with the broader economic recovery.

Policymakers said a rebound in property investment and sales was helping cement a recovery in the world's third-largest economy after exports slumped due to the global recession.

Beijing has instituted policies designed to support the property and stock markets as well as carmakers. Premier Wen Jiabao has said these sectors were crucial to sustaining the economic recovery, at least in the short term.

Chan said the improvement in property investment was primarily because of domestic lending, which soared 46.3 per cent year on year for the first eight months.

Under the government's loose monetary policy to stimulate growth, mainland commercial banks extended 7.73 trillion yuan in new loans in the first seven months of this year, far exceeding the annual target of five trillion yuan.

Chan said data on funding sources showed that while domestic investment surged, foreign funding plummeted 33.6 per cent year on year during the period.

'This, nevertheless, represents room for growth in the coming year,' she said. 'With the major economies around the world eventually coming out of recession, foreign direct investment will rebound, helping to fuel property development in China, where growth potential is still massive.'

Property development is a sizeable part of the mainland's urban fixed-asset investment. As one of three engines fuelling growth, it is playing an increasingly crucial role in reviving growth as the other two, exports and private consumption, are losing momentum. At the same time, surging prices may reinforce concern about asset bubbles in the wake of record bank loans.

But China International Capital Corp said the situation might be more complex, noting that while the poor could not buy homes, the rich could afford luxury properties in major cities.

'There is barely a price bubble for high-end homes in China's first-tier cities since they are not too expensive for wealthy individuals,' said Ha Jiming, CICC chief economist, in a research report released yesterday. 'But the cheapest residential properties are still unaffordable to low-income groups.'




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