Property risk reigniting as China economy turns corner

Jan 18 2013, 15:06 IST
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SummaryChina's annual economic growth rebounded to 7.8 per cent in the fourth-quarter of 2012.

Business is booming in Beijing's real estate offices -- good news for property agents like Zhang Huanhuan, but a headache for China's policymakers as worries resurface about the sustainability of investment in the sector.

"We've got off to a flying start in 2013 -- transactions are picking up, so are prices," said Zhang, a saleswoman at an outlet of Maitian Real Estate Agency Co. in the capital.

Recent sales included six high-end apartments at a condominium in Beijing's Dongzhimen area, a neighbourhood favoured by the city's expatriates, she said.

Government data on Friday is likely to show China's annual economic growth rebounded to 7.8 per cent in the fourth-quarter of 2012 from 7.4 per cent in the third, snapping seven straight quarters of weaker expansion.

Chinese leaders may be reassured that the economy has finally turned the corner -- even though the recovery is likely to be tepid -- but they face a delicate policy balance amid worrying signs of a renewed property frenzy.

The home buying spree has not been confined to Beijing.

New home prices in 70 major Chinese cities rose 0.3 per cent in November from October -- the fourth month in the last five to show a rise -- a modest increase but the most, nonetheless, in 19 months, official data showed.

"The first phase of 44 suites of our project launched last week has almost sold out, with only 6 suites left," said a salesman surnamed Qu, marketing a development by Wharf Holdings in Hang, capital of eastern province of Zhejiang.

"We will launch the second phase of over 300 suites and so far about 2,000 prospective buyers had registered buying interest for our project."


The new leaders of the ruling Communist Party have promised to keep pro-growth policies in place in 2013, amid expectations they will speed up migration to China's burgeoning cities by overhauling the rigid household registration, or "hukou", system, which could unleash fresh housing demand.

While reaffirming existing property cooling policies to fend off speculation, they may be tolerating a modest pick-up in the property sector to aid an economic recovery still heavily reliant on investment, analysts say.

Without stability, Xi Jinping and Li Keqiang, who are due to take over as President and Premier, respectively, in March, have no chance of delivering a slew of reforms they say are needed now to tackle the financial, industrial and income imbalances that threaten China's future development.

"Policymakers have reiterated that they don't

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