IMF says China's housing price not significantly overvalued

China's house prices are not "significantly overvalued" as a whole by mid-2010, the International Monetary Fund said in a report.

But in a number of coastal cities, most clearly in Shanghai and Shenzhen, they may be in early stages of excessive price growth, it said.

The IMF suggested China should raise interest rates further and impose a property tax to curb the risk of asset bubbles and a "disorderly fall" in house prices.

The judgment came in contrast with that of many other observers, who warned China's property market has turned overheated.

"There is no sign of broad-based and significant over-valuation of residential property prices in China today," said report authors including staff member Ashvin Ahuja. "But there is a risk that property values in large cities are deviating from fundamentals."

It estimated China's property markets will continue to have a strong underlying propensity for rapid price growth owing to structurally low real interest rates, the lack of property tax, increasing availability of mortgage financing and insufficient alternative investment vehicles.

Source: Shanghai Daily