AXA RE IM’s Khoo said the Chinese Government would manage to correct the situation, but warned people not to expect it to happen overnight, it would be a slow process. For AMP Capital’s Oliver, it was this “healthy correction” that was of more concern than a bubble, saying bubble fears were “a little over the top”. He argued that across China as a whole, property price growth had lagged behind growth in income and the so-called potential bubble in the China property market was more of a city-specific issue and even then not worthy of being labelled as a potential bubble. Oliver was not alone in his stance, with Treasury Asia Asset Management’s CIO, Peter Sartori, also expressing his scepticism over the imminent threat of a bubble in the property market, saying the concerns were a “little bit overplayed.” “We don’t think there is a bubble there at the moment,” he said. “We think there are some pockets of overvaluation, maybe in some tier one cities – Shanghai, Beijing – but if you look at the entire China residential market, there’s definitely not a bubble.”
Sartori explained there was no excessive debt and valuations overall did not appear excessive, thus concerns over a potential bubble were unnecessary. However he did concede that in the longer term, the potential was there. “If you take a three- to fiveyear view there’s the potential for bubbles to evolve because Asian economies are very strong and interest rates are probably too low and currencies are probably undervalued,” he explained. He said if interest rates and currencies were left as they were, then in the future some bubbles could form, adding it was not just a risk for China but rather a theme across the region. “But it’s not a problem for this year and I think the authorities in Asia and China are very aware of it and are tightening monetary policies as we speak.” Adding further weight to the argument that bubble fears are over the top, AMP Capital’s Oliver highlighted property prices in China were already in the process of slowing down, with growth now in the single digits as opposed to double digits like a few years ago. While Oliver said the risk was now centred on the China government over-tightening causing a collapse in growth as opposed to a bubble, he acknowledged that monetary tightening was unlikely to become aggressive. “Chinese authorities have proven very adept at managing the Chinese economy – the last thing they want is a sharp downturn in growth given the social unrest it will cause,” he concluded.