BEIJING • China's real estate investment rose by 6.9 per cent last year, official data showed yesterday, as national sales posted their strongest annual growth in seven years, thanks to a furious property boom in top-tier cities.
Real estate investment, which directly affects about 40 other business sectors in China, is considered to be a crucial driver for the economy. China's economy expanded 6.7 per cent last year, meeting expectations, the data showed.
But analysts take divergent views on whether the red-hot property market will remain a major growth driver this year, given that the authorities implemented a series of buying and ownership restrictions in hot markets to prevent a sudden correction damaging the broader economy.
Yesterday's data shows market players remained relatively optimistic about the resilience of the housing market, partially due to low inventories and firm demand in top-tier cities, despite softer price growth.
Growth in property investment quickened significantly last month to 11.1 per cent, from an increase of 5.7 per cent in the previous month, according to Reuters calculations, even as house prices showed signs of further cooling in some major cities.
"I don't think anything in terms of property investment has taken a hit even with current policy controls. It's a much longer-term process and not policy-sensitive," said Mr David Ji, head of research for China at property consultancy Knight Frank.
Mr Ji said a lack of investment options in China makes buying property still a much-desired way to channel additional income.
"The government faces a dilemma. On the one hand, they try to slow prices on the demand side. On the other hand, property developers will still head to the hot markets to develop. It's also in line with local governments' interests to garner land revenue," Mr Ji said.
"Unless the government introduces something more drastic, such as a property tax. But it has been talked about for years and faced heavy local resistance," he added.
A change in the international environment, evidenced by the uncertainties created by US President Donald Trump, has also meant China is likely to have to look inward for growth drivers, where property still comes in handy.
"I'm not sure this year is the year that the Chinese government really wants to clamp down on the property market. The international environment has changed," Mr Ji said.
China depended heavily on the property market and record government spending to drive growth last year. Chinese banks extended a record 12.56 trillion yuan (S$2.5 trillion) of loans last year, half of which was in mortgage loans.
Some analysts, also concerned about possible US-China trade tensions and further implications of Brexit, believe property will drag on China's economy later in the year.
Mr Tom Rafferty, The Economist Intelligence Unit's regional manager for China, said he "does not expect this rebound to extend far into 2017", when a slowdown in the property market, among other factors, ought to drag again on demand and output.