China property prices will be volatile

Country:  China

12 October 2009

The price of residential properties in China are expected to be unpredictable over the next few months, but the property sector will not come under any great pressure due to the country’s sustainable economic growth, according to an expert.

The China Real Estate Research Institute said the property market remains firm in the mainland's second-tier cities, where the institute warns there are a general shortage of Chinese homes and a slow launch of new projects by China property developers.

Gu Yunchang, deputy chairman of the institute, said China property sales in September and October have slowed compared to the first half of this year, owed partly to the country's tightened mortgage requirements for second-home purchases.

But with first-tier cities such as Shanghai and Beijing expected to witness a boom in residential supply over the coming months, the market is expected to cool down.

Gu said: “Asset bubbles will not burst if property prices are to stabilise. But if property prices continue to climb, bubbles will be more likely to burst.” Residential sales in China have increased dramatically during the first eight months of this year, up 70% year-on-year, while mortgage loans have risen by a staggering 94% during the same period. Residential prices in cities such as Shanghai, Hangzhou and Wenzhou have reached record highs.

Editors comment:

“With concerns that a housing bubble is forming in China, it is generally hoped that a combination of greater supply and less demand will help cool the property market over the next few months.”

See Also:   China, property investment news