Property markets in the mainland's major cities are set for another boom, driven by state policies and demand, according to a report by Sun Hung Kai Research. China's property sector, marked out by Beijing to be the economy's growth engine, was projected to grow by 35 per cent this year and 30 per cent next year in terms of floor area sold, the report said. Capital appreciation would grow by 3 per cent this year, 5 per cent next year and 10 per cent in 2003. Sun Hung Kai Research analyst Eva Cheng said growth would be driven by a host of state policies and growing buying power. Housing reform was driving a large part of the population once dependent on free housing to buy their own flats. State-owned enterprises (SOEs) were replacing living accommodation for employees with housing allowances. About 51.6 per cent of flat buyers in the housing reform scheme are SOE employees, according to a survey last year by a unit of the State Statistical Bureau of 150,000 households in the cities and townships. A policy of encouraging state-owned commercial banks to raise their exposure to the mortgage market from the present 4 per cent to 5 per cent of their loan portfolio to 15 per cent is expected to be another major driving force. Sustained improvement in average household income in cities will increase housing affordability. The report said the government had raised civil servants' salaries substantially in the past few years and was expected to do so again in the next few years.