Concern emerges about soaring real estate recovery in Asian property markets

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A Property Bubble Forming in Asia?

Real estate markets in a number of Asian countries that are showing signs of recovering from the global property downturn are now in danger of becoming too hot, it is feared.

Governments in China, Vietnam and Korea are considering introducing measures to cool the real estate markets after prices started soaring in the last few months.

In China real estate sales increased 45.3% to 1 trillion yuan ($146 billion) in the first five months of 2009 from a year earlier and property investment growth rose to 6.8%, according to figures from the National Bureau of Statistics.

Some banks are already taking measures to prevent an overheating in lending for second home buyers. They have introduced a 40% down payment rule after property prices started surging. Some brokers reported increases of 20% in the last three months alone.

Wu Xiaoling, the former vice governor of the People’s Bank of China has warned that there is a danger that property assets will bubble as bank lending flows into the sector.

In Vietnam officials said they are examining measures to prevent a real estate bubble from inflating the way it did in 2007. They want to discourage speculators from artificially raising property prices.

‘We will focus on monitoring secondary investors, especially in the high-grade housing market, because speculation by them could be a decisive factor in prompting a market collapse,’ said Nguyen Manh Ha, head of the Ministry of Construction’s Department of Housing and Real Estate Market Management.

Prices in Vietnam have been rising as government stimulus plans and a recovering stock market have encouraged investment in property. The central bank has cut the base rate to 7% percent from its peak of 14% last year and the number of mortgages available has expanded.

Also from September overseas Vietnamese will have the right to buy, own or transfer property and land in Vietnam, a change that is expected to result in a surge in demand for luxury development units.

Meanwhile South Korea is also on the edge of experiencing a property price bubble. The central bank is monitoring a big increase in mortgage lending and a pickup in real-estate prices. Record low interest rates are also stoking the nation’s economic recovery and could inflate property price bubbles.

‘The government is afraid excessive idle money is flowing into the property market, driven by record-low rates,’ said Park Jae Ryong, a research fellow at Samsung Economic Research Institute in Seoul.

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