China's continually bullish stock market may have a negative impact on the country's real estate sector in the long run by luring investors away, experts said.
"The ever-increasing stock benchmark will weigh on China's property market, but mainly on those markets featuring strong investment initiatives," said Nie Meisheng, head of the Residential Industry Association of the All-China Federation of Industry & Commerce.
But Nie told China Daily that the impact on Beijing's property market would be very limited as only one-third of property purchased in the capital is for investment purposes.
The Shanghai A-share market the world's best-performing major market this year with an 86 percent rise seemed to be well on track to smash its record high of 2,245.435 points, set on June 14, 2001.
Statistics from the Shanghai Securities Journal show that 273,700 new accounts were opened in November, a jump of 50 percent compared with October.
After the Shanghai benchmark index exceeded 2,000 points, there was a dramatic increase in new accounts, which peaked on November 23 with the number reaching 19,500.
Meanwhile, stock-oriented funds have also been selling particularly well recently. On December 1, a fund from ICBC Credit Suisse Asset Management Co raised 12 billion yuan (US$1.53 billion) on the day of its launch, becoming the first to reach its fundraising target within one day.
Dai Haosheng, a researcher at a leading property developer, said that the bullish stock market is unlikely to drag down real estate prices.
"The impact could almost be negligible," Dai told China Daily.
Turnover in Shanghai-listed A shares reached a multi-month high of 52.9 billion yuan (US$6.76 billion) on Monday, but that sum is still small compared with China's huge deposits of some 1.4 trillion yuan (US$177 billion).
"Besides, Chinese people don't have many investment channels," Dai added.
Peter Lin, director of CB Richard Ellis (CBRE), a US-based property consulting firm, also believed that the impact on China's property sector would not be obvious, especially in the short term.
"China's stock market is at a pretty high level now, with the possible profit margin shrinking and potential risks increasing. Thus, investors may quickly evacuate the stock market once it slides down. But property investment is usually long-term behavior," Lin explained.
He argued that China's property prices would continue to rise over the next three to five years, fuelled by the galloping economy and strong demand.
China's real estate prices maintained their robust growth in October, but the number of transactions involving foreign institutional investors declined due to restrictions on overseas investment.
Property prices in China's 70 large- and medium-sized cities rose 5.4 percent in October, 0.1 percentage points higher than August's rise, according to the National Development and Reform Commission (NDRC).
The prices of high-end and ordinary residential properties saw year-on-year rises of 7.7 percent and 6.4 percent, up 0.7 and 0.1 percentage points compared to September.
Beijing witnessed the biggest price rise, with year-on-year growth of 10.7 percent, while Shanghai saw its prices drop 0.6 percent compared to the same period last year.
(China Daily December 7, 2006)
