Capitaland says analysts wrong on China bubble as it raises stakes to $20 billion

As the world worries about a bubble in China's property market, Capitaland will tell investors today that "China's case is different from other property bubbles," that there is no bubble in China, and that it has raised China assets from 28 % to 36 % of its book as it goes all in a massive $20 billion contrarian bet.

Let's hope they are right. Their theory, backed up with some nice graphs, is that "National wide housing prices increased 25 %, from RMB 3,578 psm in 2008 to RMB 4,474 psm at end of 2009, but affordability has also improved due to increase in household income growth and decline in mortgage rate." It adds that "Historical nation-wide house price growth has been in line with income growth" and "Chinese buyers have significant savings to fund house purchases."

More key points include:-

Is there a property bubble in China?
• Present China's property boom cannot be labeled as a bubble
• Current market conditions driven mainly by physical demand vs supply and loose credit conditions
• Some degree of speculative demand in the Tier I cities
• Prices will rise due to rapid economic expansion but when they inflate to level beyond affordability then banks will not lend
• Prices will then naturally deflate back to affordable level
• Unlike the US, there is no subprime danger
• Comforting to note that the Central government taking steps to rein in the market

Let's hope they are right. Read the presentation here.

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