SHANGHAI - AN INVESTMENT unit of Australia's biggest investment bank Macquarie Group last week sold a Shanghai luxury residential property that was put on the block more than a year ago, taking advantage of a rebound in China's real estate market.

The 26-storey City Apartments in downtown Shanghai was sold to a small group of Chinese investors for about 300 million yuan (S$64 million), according to two people with direct knowledge of the deal. Macquarie bought the property four years ago for about 400 million yuan.

China's housing sales have surged 53 per cent in the first five months of this year as an explosion in new loans stoked demand and investment, according to a survey commissioned by the statistics bureau and just published in the China Information News.

Prices are also turning up.

Urban property prices in 70 of China's large- and medium-sized cities rose 0.2 per cent in June from a year earlier, the first increase in six months, according to the survey.

Rebounding prices could bode well for investment in the sector, but many analysts have raised concerns that the market is being supported by easy credit from China's banks, and could develop into an asset bubble, the Wall Street Journal reported on Friday.

Property transactions have been increasing since February, fuelled by low interest rates and government measures to support the sector, including tax breaks on transactions and lower downpayment requirements.

The market rebound has enabled Macquarie and other foreign institutions to dispose of their China properties more quickly.

Morgan Stanley recently sold all the units at its high-end residential project Chateau Pinnacle in downtown Shanghai, local media reported.

'Many foreign institutions are strained by the global credit squeeze and want to exit some of their China projects due to investment cycle," said Mr Alex Wang, partner at US law firm Paul, Hastings, Janofsky & Walker. -- REUTERS

With additional information from the Wall Street Journal

Read the full story in The Sunday Times.