“With China’s lending and deposit rate cut, we expect investment and speculative demand for housing to further increase,” Du said. “I have just come back from China, and in many of the (housing) projects, prices are already going up.”
But Du warns there is “danger” that prices could “surge” and place the sector at risk of aggressive policy tightening.
“In a few months, once (Chinese) economic data becomes better and the central government has more room to adjust the economy, (the government) may face a difficult choice on whether to come down hard on rising housing prices again, so the policy risk is still there,” Du said.
A sharp slowdown in the property sector has been regarded as a major risk for the economy, as real estate investment accounts for 13 percent of the country’s overall gross domestic product.
Wendy Luo of Barclays, agrees that large price rises would put the government in a “tough spot”, and could trigger tightening moves.
“In order to keep policy credible and avoid an asset bubble, (the government) may control credit supply to developers,” Luo said.
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