China property prices to rise in 2010: govt think tank

(BEIJING) Housing prices in China will keep rising next year, helped by a renewed surge in bank lending and stronger inflationary expectations, the government's top think tank said yesterday.

However, the property market may ebb slightly and stabilise in the second half of 2010 after China moves to tighten monetary policy, said Ni Pengfei, a researcher at the Chinese Academy of Social Sciences (CASS).

'Our judgement is that property prices will keep rising in 2010, but that there will be some volatility,' Mr Ni said at a press conference to launch CASS' annual housing market report.

The traditional rush by banks to lend at the start of the year would be on full display in early 2010, with monetary policy still relatively loose, providing ample cash for property acquisitions, Mr Ni said.

On top of that, rising inflation expectations would prompt Chinese investors to put more of their cash in assets that benefit from rising price levels, with property a prime choice, he added.

Housing prices in China's 70 biggest cities rose 3.9 per cent in October from a year earlier, the fastest rate of property inflation since September 2008 and confirming a solid rebound from a slump that began late last year.

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While China's long-term urbanisation trend has underpinned the property market, housing affordability remains a concern for many ordinary Chinese. Local media regularly debate whether current prices, at record highs in some markets, are sustainable.

Beijing introduced a range of policies to support the real estate market late last year, from reducing down payments and mortgage rates to making it easier for residents to sell homes.

A burst of bank lending, not government policies, had been the main factor driving the recovery in the real estate market, Mr Ni said.

But he added that Beijing should keep its property stimulus policies in place, fine-tuning them to ensure they benefited ordinary citizens trying to buy homes and not speculators seeking to make a quick profit. -- Reuters