BEIJING: China Vanke, the country's second-largest property develope has warned of a property bubble forming in major cities including Beijing and Shanghai as a result of the surge in bank lending this year, a local newspaper reported.

Vanke Chairman Wang Shi is the latest of China's top developers to sound the alarm after housing prices soared beyond pre-financial crisis levels, their climb halted only briefly by the global turmoil.

"There is currently no bubble in second- and third-tier cities, but I am very concerned that the bubble will spread to these cities," Wang was quoted by the Oriental Morning Post as saying.

Another major developer, SOHO China, warned last week that bubbles were swelling throughout the Chinese property market, particularly in second-tier cities.

About one-sixth of China's more than 9 trillion yuan (US$1.3 trillion) in new loans this year has flowed into the property sector.

Concerned that an asset bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date -- such as stiffer rules for transaction tax -- have been relatively mild.

Wang said developers needed to look at what could happen over the next decade, not only this year or next, and to be prepared for the eventual bursting of the housing bubble.

"When the market changes or turns bad suddenly, what shall we do?" he said. - Reuters
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