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Operations and market reviewChinaWuxi is one of China’s fastestgrowing second-tier cities withsubstantial growth potential inits housing market.Wuxi TownshipChina’s housing market will grow further, with stronghousing demand driven by robust economic fundamentals,increasing income, continued urbanisation and affordablemortgage financing. The expected Renminbi appreciationwill attract investment in China’s housing market and coolingmeasures will help create a healthy market to achievelong-term sustainable growth.ResidentialShanghai downtown housing prices to remain firmShanghai’s housing market started to recover in September2006, after its dip following the implementation of coolingmeasures. The market registered a primary housing pricedecline of 0.1% for the whole of 2006.Shanghai’s housing market will remain positive, underpinnedby robust demand in line with the surging urban disposableincome, which grew 10.8% in 2006. Downtown housingprices will remain firm in 2007, supported by tight supplyin the city centre. Land control on villa development willalso push villa prices up.Continued demand to boost Beijing’s housing marketPrimary housing prices in Beijing rose 10.4% in 2006,driven by strong genuine housing demand and limitedsupply before the 2008 Olympic Games. Completedhousing stock dropped 22.8% while stock under constructiondeclined 13.3%.Beijing’s residential market will grow further, backed bygood economic prospects, increasing regional demandwith the construction of inter-city rail network, a greenerand vibrant city environment and continued strongdemand for high quality homes.Chengdu’s housing market set to grow furtherReal estate investment in Chengdu surged 37.4% in2006 while primary housing prices increased 8.5%, dueto sustainable local demand from redevelopment of olddistricts, as well as increasing investment demand fromoutside Chengdu.The housing market will continue its healthy growth,supported by a growing economy, sustainable genuinedemand and surging purchasing power. The expansionof foreign companies in the city will also bring demandfor high quality housing.Substantial residential demand in TianjinPrimary housing prices in Tianjin rose 7.8% in 2006,mainly driven by rising local demand. Tianjin’s housingmarket will see further growth in the next few years.130Operations and market reviewChinaKeppel Land LimitedReport to Shareholders 2006