When 27-year-old Li Lin invited his parents to Beijing to visit the model apartment he had just bought, the family was surprised and very happy at how wildly its value had changed in a short time.

"You can say the apartment helped me earn more than 300,000 yuan in five months," Li said.

"I did not expect the value of my investment to rise that quickly," Li said.

Li's apartment is located between Beijing's East Third Ring and Fourth Ring Road, and is still under construction.

He bought it at a price of 19,000 yuan per sq m from renowned developer Vanke in March, and the value soared to a staggering 26,000 per sq m in August.

While government officials are pleased to see a recovered real estate sector, they also are starting to worry that prices are rising too quickly, luring speculators into the market and turning it into an asset bubble - not an economic driver.

"Based on a very favorable macro-economic environment, I feel we may face a long-term asset bubble problem," said Sun Mingchun, chief China economist at Nomura International (Hong Kong) Ltd.

"And it may be inevitable," he added.

Four factors

Sun said four factors could help form an asset bubble.

First, Sun said he believes China's economic growth is a "V" style in reverse, no doubt to meet its GDP growth target of 8 percent this year.

Second, consumer price index (CPI) inflationary pressure is small.

"China's CPI might fall 0.5 percent year-on-year for the whole of 2009," Sun said, forecasting a probably mild rebound next year.

Third, when it comes to liquidity, Sun regarded it as "extremely ample" this year, "very ample" next year and still "ample" in 2011.

With enough liquidity in hand, if people do not buy consumer goods, many might invest the money in assets, pushing asset prices to a new level, he said.

Fourth, the central government is unlikely to make a big change in terms of macro-economic policies, so "we can call it very mild", he said.

Although small adjustments might be adopted, they will not harm the core of the current economic policy environment, he said.

Loan growth could total 10 trillion yuan this year. And banks might continue to make loans of more than 10 trillion each year in 2010 and 2011 to reinvest in projects that had been activated by the stimulus plan but still need money for further construction, he said.

"When we look back in history, it is really hard to find a time when these four factors worked together. Investors and policy makers should be alert to this," Sun added.

Latest statistics show that housing prices in China's 70 major cities grew 1 percent in July from a year earlier - the biggest increase over nine months.

China's property sales surged 60 percent by value in the first seven months.

The A-share market also echoed the property sector's strong rebound.

The Shanghai Composite Index climbed to 3478.01 on Aug 4, from a two-year low of 1664.93 points on October 28, 2008.

Although a fierce correction followed, the market still closed at 2,989.79 points on September 11.