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Mainland real estate market back on growth track
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10:41, July 21, 2009

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Prompted by the explosive bank lending in the first half, China's real estate market appeared to have quickly returned to its growing path.

The average price of new homes in 36 medium- and large-sized cities rose to 6,554 yuan per sq m in June, up 6.3 percent from a year earlier, the National Development and Reform Commission said on its website yesterday. The prices were 1.1 percent higher than that of May, the top economic planner said.

The increase in new bank loans to 7.37 trillion yuan in the first half helped spur demand for property and boosted prices, said Bohai Securities Co analyst Zhou Hu. Housing prices in 70 major Chinese cities rose 0.2 percent year-on-year in June, the first time in seven months, according to the National Bureau of Statistics.

"China's property market is recovering and prices should continue to rise in the third quarter," said Zhou.

Nationwide property sales in June rose 32 percent by floor space and 53 percent by value from a year earlier, the National Bureau of Statistics said in early June. Investments in property development in the first half increased 9.9 percent, the agency said.

"The economic stimulus and the sharp increase in overall liquidity have also helped to turn around the sentiment in the property sector," said Wang Tao, head of economic research in China for UBS Securities.

Lending to developers increased sharply recently following a period of credit restrictions, while mortgage lending has also accelerated, with the quarter-on-quarter annualized mortgage lending rising by 88 percent in the first quarter and likely to have continued at a rapid pace in recent months, she said in a research note.

Wu Xiaoling, analyst with the Greatwall Securities, said that another factor driving up the property investment was the mounting expectation on future inflation.

Vanke, China's biggest developer by market value, said on June 4 that its first-half property sales rose 28 percent from a year earlier to 30.8 billion yuan.

In face of the mounting risks arising from the recovering real estate market, the country's top banking regulator has warned domestic lenders to strengthen scrutiny on mortgage lending approval.

Source: China Daily

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