Economy

Property market set to make soft landing

By Jin Zhu (China Daily)
Updated: 2010-11-22 08:14

BEIJING - China's property prices are likely to decline by almost 20 percent next year and the market may go through a major period of readjustment in March or April 2011, according to a report released on Saturday by Beijing-based Renmin University of China.

Prices will be dragged down by the government's measures to cool the property market, which have placed constraints on developers, as well as by an adjustment of the country's monetary policy, though the sector is not expected to suffer a "hard landing", according to the report.

The capital available to developers is forecast to contract sharply in the first quarter of next year. The situation is likely to be exacerbated by tighter financing being available, loan repayments being due and stricter restrictions on property buyers, according to Liu Yuanchun, deputy head of the university's School of Economics.

However, Liu ruled out a steep correction in the country's property market, saying that the tight financial situation will not cause a steep plunge in prices and the market is expected to make a soft landing.

Housing prices in 70 of the country's large and medium-sized cities rose 0.2 percent in October from the preceding month, slower than the 0.5 percent month-on-month increase in September, the latest data from the National Bureau of Statistics show.

The year-on-year price rise in October was 8.6 percent, the sixth straight month of a fall in the growth rate from a peak of 12.8 percent in April, according to the bureau.

Chinese authorities have introduced a series of cooling measures in the country's property market since September, including a nationwide suspension of loan lending for third home purchases and higher down payment requirements for first-time buyers.

Foreign citizens residing in China are only allowed to buy a single home for their own personal use, while foreign institutions with a presence in the country are only permitted to buy commercial property, which must be in the same city where they are registered, according to a notice released earlier this month by the Ministry of Housing and Urban-Rural Development and the State Administration of Foreign Exchange.

Li Chang'an, a public policy professor at the University of International Business and Economics in Beijing, said a decline in property prices could be achieved if the government is intent on proceeding with its cooling measures and ensuring the supply of affordable housing in the realty market.

"Price declines in the property market may first appear in small and medium-sized cities due to their excessive development of new buildings, then in large cities like Beijing and Shanghai," he said.

Xinhua contributed to this story.