Property in China 'still affordable'

CAPITALAND president and chief executive Liew Mun Leong said at a forum yesterday that there is no widespread asset bubble in China, because outside certain major cities, people's mortgage payments have not become unaffordable relative to their incomes.

Mr Liew told students at the National University of Singapore Business School that there are 'speculative forces' in major cities like Beijing, Shanghai, Guangzhou and Shenzhen.

This can be seen from the so-called affordability ratio, which measures the proportion of the actual monthly cost of the mortgage to monthly take-home income, he said.

High numbers were flagged for Shanghai (47 per cent) and Beijing (45 per cent).

However, for the 'whole of China', it was only about 17 per cent - way below the 30 per cent to 40 per cent benchmark of debt service to income which experts regard as the international standard for housing affordability.

Mr Liew urged the Chinese government to continue to rein in speculation and increase the stock of affordable housing.

Affordable housing should come under a different set of policies from high-end housing because strong fundamentals underpin demand, he said. 'Income growth still exceeds housing price growth for affordable housing.'

Mr Liew's comments come at a time when new figures have shown that China's property prices rose at the fastest pace in almost two years last month.

Residential and commercial real-estate prices in 70 cities climbed 10.7 per cent from a year earlier, topping a gain of 9.5 per cent in January.

To cool speculation, the authorities in January re-imposed a tax on houses sold within five years of their purchase, after having cut the taxable period to two years in January last year to bolster the then-flagging market.

Mr Liew said while China has plenty of growth potential, human capital will pose the ultimate challenge.
'China will have 25 million tertiary students in 2010 but by this time, China will need 75,000 top level executives with global experience. Where will they come from? How will they be trained?' he questioned.
Still, the rise of China is unstoppable, at least for now, he said.

'There will be a rebalancing of global economic power between Asia/China and the rest of the world. The world has to adapt to this new rebalance of economic power and China too has to adapt to her new role in the changing economic world to sustain its renaissance growth.'


Source, Straits Times 31 March 2010