Year-on-year growth in real estate investment also gained pace, increasing 14.7% from January to August. Shenzhen and Jinhua, the main cities in the eastern coastal provinces, led the gains.
Most analysts believe the recovery is due to the series of measures introduced by the Chinese government since last October, including tax breaks, to support the real estate sector, which accounts for more than 20% of urban fixed investments and is a key driver of China’s economic recovery.
However, some economists are concerned that funds have flooded into stock and real estate markets, instead of helping the real economy, as companies seek to use stimulus bank loans to make quick profits.
Analysts also warned that property prices could face a major correction if the government has to make aggressive moves to prevent asset bubble build-ups.
Surprisingly new bank loans in July were already sharply down from record highs seen in the first half of the year.
But at the same time the figures show that property sales in value terms rose 69.9% in the first eight months of the year, up from 60.4% in the first six months of 2009, indicating the slowdown in new lending has not hurt the sector.
The continued rise in asset prices reflects the recovery in investor confidence,’ said Sherman Chan, an economist at Moody’s.
But he warned that policy makers need to keep a close eye on asset prices in the near term and act fast in preventing bubbles which could derail the economy.
Investment in property development also grew, up 14.7% and no slowdown is predicted. ‘Property investment will grow by 20% this year and it will continue to be a driving force for China’s growth this and next year,’ said Xing Ziqiang, an economist at China International Capital in Beijing.
