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China Housing Bubble? Watch These 2 Cities: Vanke

Controlling home price increases in China's capital Beijing and financial hub Shanghai is critical for cooling the country's broader property market, according to Wang Shi, chairman of Vanke, the mainland's largest real estate developer.

"My concern is that if the price increases in those two cities can't be controlled, it will result in price increases in other cities as well and that won't be a good thing," Wang told CNBC on the sidelines of the China Entrepreneur Club's Annual Summit of Green Companies in Kunming, which is located in the country's southwestern Yunnan province.

(Read More: Why China's Property Market Is Getting Scary)

Property prices in Beijing and Shanghai have surged over the past decade driving the average home buyer out of the market. New home prices in the two cities rose 8.6 percent and 6.4 percent, respectively, in March from a year earlier.

Last month, China's central government unveiled policies to curb speculative demand and stabilize prices nationwide. It called for stricter enforcement of a 20 percent capital gains tax on home sale profits and asked cities with fast property price increases to raise the down payment requirement and mortgage rates on second homes.

However, Wang who believes the country's property market is in a bubble state, said he is unsure whether Beijing's efforts to control prices will be effective.

Construction on a development in Beijing, China.
Nelson Ching | Bloomberg | Getty Images
Construction on a development in Beijing, China.

"There has always been a bubble in the Chinese real estate market. The next step is how do we control the price increases and this seems to be a bit uncertain," Wang said.

But he noted that the slowdown in the world's second largest economy could help temper gains. China's economy grew at a slower-than-expected 7.7 percent in the first quarter. "I don't think the prices will continue to rise that fast" he said while the economy grows at these levels.

Expansion Outside China

As Beijing cracks down on the property market, Chinese developers including Vanke are looking outbound for growth opportunities. Earlier this year the company invested in a high-end residential project in San Francisco.

"We want to follow where our customers are going. Almost all new immigrants from China are headed to the U.S. so we see this as a great way to have an already established brand that Chinese customers will recognize," he said.

In Addition, Wang said that the company has a lot to learn from the U.S. because it is a developed real estate market.

Outside the U.S., he said the company is looking to expand via teaming up with local partners in developing economies in Southeast Asia, South Africa, Brazil and Russia.

Contact Entrepreneur Asia

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