But there is concern that the recovery is moving too fast and it could create a real-estate bubble in the world's fastest-growing major economy. But the government has no intention of changing its stimulus plans at present to try to cool the market.
Sales accelerated after a 53% gain in the first half of 2009 from a year earlier, figures from the National Statistics Bureau show. Real estate investment rose 11.6%, up from 9.9% in the six months to June 30.
Residential property prices in 70 major cities increased 1% in July from a year earlier, the biggest increase in nine months, the National Development and Reform Commission said.
The price increases are unlikely to cool, according to the latest predictions. Home prices in China will rise 20% by the end of 2010, according to Eric Wong, an analyst at UBS AG. And a report from Stanley & Partners Investment Management says that Shanghai's property market will probably be the strongest in the country with residential prices up as much as 20% over the next year.
Some analysts believe that the government will have to do something to slow down the acceleration. 'Policy makers may be getting a bit edgy about asset bubbles developing. They may use alternative measures to cool prices,' said David Cohen, an economist with Action Economics in Singapore.
'There's concern that while the macro-economic policy will stay the course, the real-estate industry won't escape some policy fine-tuning,' said Zhang Chifei, a real- estate analyst at Huatai Securities.
Others disagree. 'The overall increase that we're seeing in property prices is still manageable. Higher confidence and more liquidity are causing prices gains. The government should be more concerned about the stock market,' said Sherman Chan, an economist at Moody's.
The property recovery is being boosted by a lack of investment alternatives in China, according to Kenneth Tsang, Asia Pacific head of research at LaSalle Investment Management.
However, some want the government to take action. 'Housing prices in Shanghai are already too high. We must prevent excessive inflation of home prices. The government should do something to effectively control the speed of growth of the real estate market,' said Han Zheng, mayor of the city.
His administration has decided to increase the supply of land for property development and speed up construction of affordable housing for low-income families in the second half of this year to help the situation.
