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China property market recovery expected second half of 2009

The outlook for the property money is critical for the Chinese economy as it accounts for about a quarter of fixed investment in the country, advisers at CB Richard Ellis point out.

'We hope that confidence will recover sometime in 2009, and that we'll get a more positive sentiment in the residential sector sometime between the middle and end of 2009,' said Chris Brooke, the global property services provider's chief executive for Greater China.

The World Bank has lowered its 2009 growth forecast for China because of faltering exports and a depressed real estate market. The property sector has seen prices fall as much as 40% in some cities and nationwide property inflation has slowed to 1.6%.

However, Brooke said that some investors are looking at buying opportunities, tempted by a strong economic growth outlook in the medium term, attractive valuations in some areas and developers' hunger for funding.

'We do see increasing demand from developers looking for investment partners and we see continued interest in the China market from the investors,' Brooke said.

However, investors would probably wait to see whether China's stimulus package succeeds in stabilising the real estate market and whether general sentiment in the US and elsewhere improves, enabling them to secure funds.

The Chinese government has announced a $586 billion package to spur domestic growth. The authorities have also slashed taxes, down payments and mortgage rates to boost the real estate sector.

What happens really depends on how effective the government measures are in terms of the stimulus package and of the relaxation measures the government is introducing to the regulatory framework,' Brooke added.

Separately, the China Real Estate Chamber of Commerce, a semi-governmental association, said the impact of the policies had yet to be seen; it expected growth in property investment would slow further this quarter.

The group said developers would be forced to cut prices to ease cash flow strains and it forecast a rise in vacancy rates next year as projects underway came onto the market.