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The expansion of foreign companies, such as Motorolaand Airbus, will create new jobs and increase housingdemand. In addition, the inter-city rail network will reducetravelling time between cities and boost housing demandfrom outside Tianjin.Good growth potential in WuxiIn 2006, real estate investment in Wuxi rose 21.5% whileprimary housing prices increased 3.5%. As one of thefastest growing second-tier cities in China, Wuxi’s housingmarket has substantial growth potential, supported byhigher disposable income, better job opportunities andincreasing foreign investment. The development of moresecondary city centres will also create new housing demand.Polarisation of luxury and mass markets in Hong KongResidential transactions in 2006 declined 4.1% yearon-yearto 99,087 units. The mass residential marketremained soft due mainly to higher interest rates, whilethe luxury residential market has performed relativelystronger. Hong Kong’s 2007 property market is expectedto be strong, driven by sustained economic growth andanticipated interest rate cut.China 2005 2006E 2007F 2008FReal GDP growth (%) 10.4 10.7 9.5 9.0Commercial banks’ prime rate (average, %) 5.6 5.9 6.2 6.4Inward FDI (US$ Bn) 79.1 81.1 78.2 81.1Exchange rate (RMB/USD, average) 8.19 7.97 7.62 7.46Personal disposable income (US$ Bn) 1,003 1,147 1,326 1,494CPI change (average, %) 1.8 1.4 2.5 2.7Hong Kong 2005 2006E 2007F 2008FReal GDP growth (%) 7.5 6.8 4.7 4.7Commercial banks’ prime rate (average, %) 6.2 7.9 8.3 8.2Inward FDI (US$ Bn) 35.9 38.3 29.0 27.0Exchange rate (HKD/USD, average) 7.8 7.8 7.8 7.8Personal disposable income (US$ Bn) 136.0 143.2 150.3 156.7CPI change (average, %) 0.9 2.0 2.5 2.6Source: Economist Intelligence UnitOperations and market reviewChinaKeppel Land LimitedReport to Shareholders 2006131