Published June 18, 2009

No further fall seen in China property prices

(SHANGHAI) China's property prices are unlikely to fall further as increased money supply and credit expansion inflate asset prices, BNP Paribas said, citing China Real Estate Chamber of Commerce president Nie Meisheng.

Residential prices will be the first to rebound, driven by urbanisation, followed by commercial property such as shopping centres, BNP Paribas wrote in a note yesterday, citing comments made by Ms Nie at a June 11 workshop organised by the bank.

China's domestic banks extended a record 5.84 trillion yuan (S$1.24 trillion) of loans in the first five months of 2009, almost triple the value a year earlier. Zurich-based UBS AG forecasts new credit may reach eight trillion yuan in 2009.

Housing prices in 70 Chinese cities fell 1.1 per cent in April from a year earlier, the smallest drop in three months, according to data from the National Development and Reform Commission.

The central bank has cut interest rates five times since September, scrapped quotas that limited lending and pressed banks to support the government's four trillion yuan stimulus programme. China's property sales rose 45.3 per cent in the first five months to one trillion yuan from a year earlier, the statistics bureau said on June 10. That compares with a 19.5 per cent decline for all of 2008.

China's government is unlikely to adopt a property tax within three years due to 'several technical difficulties', Ms Nie said, according to the BNP Paribas report.

A measure of property developers on the Shanghai Composite Index has more than doubled this year, leading gains among the five industry groups on the gauge. -- Bloomberg