SHANGHAI, CHINA-The bubble is beginning to form again in China,where purchases of high-end office and retail buildings totaledabout $7.4 billion in the first half of 2010, according to CBRichard Ellis Group Inc. here. Many believe the office market hashit bottom, given data such as rents for buildings in Beijing beingup in the first quarter by 5.7%, says Danny Ma, a senior directorat the company.

He tells that stringent measures were released inApril by the central government in order to tighten the market bycurbing speculative demand. In the following several months, theresidential market saw broad-based shrinking of transaction volume,especially in top-tier cities, of which property price surged in2009. The commercial property market appears to be more stable, Masays. “On the back of sound fundamental growth across China, theprime office market has plainly bottomed out since the second halfin 15 major cities that we monitor. Meanwhile, most cities in ourcoverage have witnessed double-digit growth in total retail salesin recent years. The sound growth of fundamentals is the primarydriver for steady growth of prime retail properties amongregions.”

There was economic growth easing in the second quarter, largelyattributed to fewer new infrastructure investment projects havingbeen approved since 2010, and new loan extension moderated recentlyto rein in the growth of annual credit and the stimulus forinvestment seen in 2009 returned, Ma says. “However, the centralgovernment is willing to see a sustained growth of the economythrough transition from being investment driven toconsumption-based, rather than a hard landing,” he says. “Lookingahead, developers may start delaying new construction to offset theuncertainty of the market and hence further soften the growth.Given that the government cannot tolerate a sharp decline ininvestment growth, it may accelerate the construction of low-renthousing and economic housing to fuel the economy.”

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