China real estate faces bubble fears

It was the sixth successive year-on-year increase, snapping a months-long slump dating from December last year when the government attempted to rein in runaway prices and as the global economic crisis kicked in.

After trying to cool the market a year ago, Beijing this year responded to the economic crisis with tax breaks and other measures to prop up the property sector, which accounts for more than 20 percent of urban fixed investments.

But concerns are rising that bubbles are building in real estate due to rampant speculation.

The house price-to-income ratio — the ratio of the median market home price and the median annual household income — is expected to hit 8.3 in China this year, the Chinese Academy of Social Sciences said in a report on Monday.

A rational range is between three and six, the think tank said.

In response to mounting public complaints about excessively high house prices, the government said this week it would curb speculative home purchases next year — possibly by restricting bank loans to the sector.

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