The rebound in the Chinese property market is sustainable and could see real estate investment increase by 30% in 2010, it is claimed.
According to Fan Gang, an economist who advises the central bank, it is the real estate recovery that will become a driving force in a V-shaped economic recovery.
'China's property industry cannot only create great wealth but also form an important basis for sustainable economic growth,' he told a forum in south China.
He also said that the Chinese government should not rush to withdraw its fiscal stimulus policies that are credited with helping the real estate revival.
However, some other economists doubt that the property revival can be sustained. They see price bubbles forming in some markets, inflated by a lending frenzy in the first half of the year.
But Jinsong Du, analyst with Credit Suisse said property prices will most likely continue to rise in coming months, mainly because of tight supply but the growth will slow when new units are released.
'We believe new supply will begin to increase again in September, which means the magnitude of the price increase will likely slow in the fourth quarter,' he explained.
Some cautious home buyers have retreated to the sidelines amid concerns the government may tighten credit in the real-estate market and slow price growth in some cities, he added.
And analysts at Nomura said that increases in supply of land through government auctions will moderate property price growth in coming months. 'We think the government wouldn't want to run the risk of over-tightening, which could derail the economic growth momentum,' Nomura said.
Certainly developers are building more. The latest figures show that China's biggest listed property developer, Vanke, has increases its housing starts target for this year by 45% and rival Poly Real Estate said sales in the first half of this year rose 143% from a year earlier.
On the ground, developers and construction firms, big and small, are trying to meet the new demand, and say that last years' downturn is now a distant memory.
The economic importance of the property sector in China is hard to overstate. Investment in residential property accounted for about 10% of gross domestic product before the global economic downturn, roughly the same as the country's vaunted export factories.[Property Wire News]