Property prices in the country's 70 large and medium cities rose by 7.1 percent on a yearly basis last month despite the government's efforts to cool down the market, the National Development and Reform Commission (NDRC) said yesterday.

The growth rate, the highest since 2006, contributed to the strong economy, experts said.

"China's sizzling property market is closely linked with the overall economy," said Anna M Kalifa, head of the research department at Jones Lang LaSalle Beijing.

The country's gross domestic product grew by 11.5 percent in the first half of the year, beating experts' forecasts.

Beihai, Shenzhen, Nanjing and Beijing led the country in terms of price increases, with growth rates of 15.5 percent, 13.9 percent, 11.3 percent and 10 percent, respectively. Beihai, a small city at the southern end of South China's Guangxi Zhuang Autonomous Region, has been at the top of the list for four months in a row, reflecting the strong growth in second- and third-tier cities.

June and July are generally key times for property deals, not only in China, but also for the entire world, Kalifa said.

"Property prices in China will continue to grow in the next half of the year, but at a slower pace," Kalifa told China Daily. "We expect the property price to grow by around 8 percent from January 2007 to January 2008, and we've seen most of that growth already."

The sales prices of pre-owned houses jumped by 7.8 percent last month. That was one percentage point higher than in May. Shenzhen and Beijing are still among the top four cities in terms of price hikes, with growth rates of 16.1 percent and 9.4 percent, respectively.

Though the government has been adjusting its real estate policies, skyrocketing property prices could continue to pose a risk in the second half of the year, raising the possibility that further cooling measures could be on the horizon, said Zhu Zhongyi, secretary general of the China Real Estate Association.

"The government could launch measures targeting key cities if the property markets there get out of control," Zhu said.

"And the restrained attitude towards foreign investment in the property market shows no signs of loosening in the next six months."

Meanwhile, real estate investment jumped by 28.5 percent on a yearly basis, topping 989 billion yuan in the first six months, according to the NDRC. That was 4.3 percentage points higher than during the same period of last year and 1.6 percentage points higher than the first quarter of this year.

"The growth is mainly driven by second-tier cities," said Eric Chan, deputy managing director of Savills Property Services (Beijing) Company.

"And we are still expecting more investment in the property sector in the second half of the year, but the growth rate depends on the policy and investment environment."

(China Daily 07/24/2007 page3)