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Economist predicts housing price rally

By Qiang Xiaoji (chinadaily.com.cn)
Updated: 2009-06-03 14:30

China's housing prices are predicted to rise by 5 to 10 percent this year and will keep a growth of 10 percent next year, Frank Gong, chief economist at JP Morgan, said at the annual meeting of China Global Real Estate Institute held in Shanghai on Tuesday.

Urban residents have relatively high saving rates that will be sufficient to support consumption, Gong said. He added that the fast growing urban population indicates a huge domestic housing demand.

Related readings:  Housing price hike curbs consumption: expert  Roaring housing price  Housing price remains high  Housing price to continue to rise in second quarter

In the past two years the Chinese government has adopted a tightening policy on the housing market to prevent property bubbles, Gong said. This year, the government turned to loose credit and tax policies, which greatly stimulated home purchases in China, he added.

He suggested that now be good timing for real estate developers and institutional investors to invest in the sector due to the drop in land prices, building material prices and labor costs. Investing now will make for higher returns when the economy recovers in two to three years, he added.

Hui Jianqiang, analyst of E-house China R&D Institute in Shanghai, echoed Gong's prediction as he said housing investment and sales are not in balance. "It is necessary for the government to adopt policies to lower the proportion of capital fund, in order to spur the investment in real estate," Hui said.

According to statistics released by the Shanghai Statistics Bureau, in the first four months of this year, investment in real estate development increased by 1.8 percent, while residential property development had a decrease of 10.1 percent from the same period last year. In comparison, housing sales in Shanghai amounted to 8.2 million sq m, up 21.4 percent compared with the same period one year earlier.