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Developers dispute over real estate bubble
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16:45, July 28, 2009

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The central government has held meetings to research and investigate problems in the real estate market, and the call to prevent a bubble forming keeps getting louder. Is there a real need to cool the real estate market down in the second half of the year? Housing prices in some areas are soaring while the real economy is still at rock bottom. Is an overheated real estate market a crisis or an opportunity? Real estate developers have put forward different views on the future course of the market for the second half of the year.

Sunshine100 Real Estate Group Executive Vice President Fan Xiaochong: The real economy is still at rock bottom. Many industries are facing the problem of overcapacity and profit on investments flowing into these industries not being optimistic. Therefore, they have no other choice but to buy land at sky-high prices, pushing up real estate prices. Of course, inflation expectations are also a factor.

SOHO China Chairman Pan Shiyi: At present, the whole industry is like a sick person and each organ is weak. But suddenly, an organ, the real estate sector, gets overexcited. This is not a healthy trend and might even be more dangerous.

Huayuan Group President Ren Zhiqiang: I do not think that a bubble has accumulated in the real estate market. Judging by global fluidity, a bubble must occur and this may lead to a price rise in some sectors' assets. After all, we are now in a state of deflation. The expectation of inflation is nothing but an expectation. The CPI, at least, will continue to drop in the short term. Therefore, inflation will not happen this year.

Fan: The bubble already exists to some extent and the issue is how to deal with it. It is not right to knock the real estate industry down in one stroke; after all, real estate investment has still not fully recovered. At present, however, real estate is frequently used as capital leverage. Therefore, the supervisory authorities will certainly refine policies to prevent financial risks.

Ren: In a situation where the global economy has not fully recovered, the entire world is experiencing a bubble and China is no exception. Economic recovery and the stimulation of domestic spending need to be driven by the real estate industry. The country will certainly continue a relaxed monetary policy.

Ren believes that the investment in real estate will grow in the second half of the year and the conflict between the expectation of inflation and the expectation of policy adjustment will accelerate.

By People's Daily Online



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