IMF: China’s property market has ‘strong’ fundamentals

HONG KONG: The property market in China has “strong fundamentals”, reducing the risks of an asset bubble building up in the world’s third-largest economy, a representative of the International Monetary Fund (IMF) said.

Real estate prices are “rising after a long slump”, Vivek Arora, the fund’s senior resident representative in China, said in an interview in Hong Kong on Dec 14.

“Affordability has gone up, so for low and middle-income housing the prices have fallen relative to incomes,” Arora said. “And the government is supporting the low and middle-income housing sector. So, there are strong fundamentals in the housing market.”

China’s government plans to target “excessive” growth in property prices in some cities, the official Xinhua news agency said on Dec 14, citing a meeting of the country’s State Council. Property prices climbed last month at the fastest pace since July 2008, adding to concern that record lending may fuel unsustainable asset-price increases in the world’s fastest-growing major economy.

The State Council said last week the government will re-impose a sales tax on homes sold within five years, after cutting the period to two years in January. — Bloomberg LP

This article appeared in The Edge Financial Daily, Dec 15, 2009.