China’s housing market: Boom or bubble?

China’s housing market: Boom or bubble?

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Enormous investment opportunities lay in the emerging superpower, says Cityscape Asia 2010

China holds enormous opportunities for investment as its economy surges, say leading economists and investment experts at Cityscape Asia 2010 in Singapore yesterday. Speaking at a keynote session on evaluating the economic outlook for China 2010 and beyond, David Wong, Chief Economist at Shui On Land, said the Asian giant is a market that investors can no longer afford to ignore. “China is undisputedly growing in relevance. Early government intervention and lower levels of debt compared to its western counterparts helped it to weather the financial storm better than most.”

 

Since October 2008, the Chinese government has implemented aggressive macroeconomic expansion policies, along with fiscal stimulus packages and monetary expansion. These policies have led to the rapid recovery of the domestic market and also signs of a recovery in investment. The rapid growth in the China economy has led to a 8.7% per cent annual economic growth rate in 2009. Among the world’s major economies, China is surging at an
unmatched pace with 10 per cent growth forecast for 2010. Wong said this indicates huge room for rapid, catch-up growth and thus investment opportunities.

Indeed, the Chinese’s domestic demand contributed 12.6% points to GDP growth in 2009 the country’s strongest performance since the early 1990s. With the rebound of the housing sector playing a prominent role in this recovery, the discussion has now moved to whether China is harnessing a housing boom, or bubble. Wong continued: “The current upswing is resulting in unprecedented liquidity easing after the global financial crisis and so there are some recent housing market developments that appear symptomatic of a bubble.”

“Sales have nearly doubled over the past year, housing credit has increased sharply, and the price of houses in the secondary market has accelerated rapidly. Yet from an affordability standpoint, property prices appear expensive and seem to have factored in a certain amount of future income growth.”

Ample saving deposits of residents have helped to support mortgage lending, as well as contributing to China’s substantial property market boom. Wong said: “Conventional wisdom holds that if China maintains its phenomenal economic growth, then last year’s loans need not turn bad. The asset bubble is no longer a major economic risk with the new tightening policies. Further, property market cooling measures will not derail economic recovery but enhance sustainability of future growth.” “Therefore there are enormous opportunities for investing in China’s long term growth and resurgence as the emphasis changes from growth speed to growth quality,” Wong concluded.

-ENDS

About Cityscape Asia

Cityscape Asia is the annual exhibition and conference focusing on all aspects of the real estate development cycle. The three day event ran from 18 – 20 May 2010 at the Singapore International Convention and Exhibition  Centre (Suntec City Singapore). Top deal-makers from leading developers, banks, institutional investors and investment authorities, as well as senior officers from foremost private equity funds and investment advisory firms gather at Cityscape Asia to discuss key issues and investment opportunities. Cityscape Asia is a key part of the Cityscape Portfolio organised by IIR Middle East, which also includes Abu Dhabi, Global taking place in Dubai, India, China, Jeddah, USA, Riyadh and South America. For more information about Cityscape Asia 2010 and related events, please visit: www.cityscapeasia.com