Mainland home prices set to fall by up to 20pc
Home prices on the mainland may fall sharply in the next few months as a result of Beijing's intensified crackdown on the overheated market, according to property consultancies who predict that developers will now begin offering discounts.
Jones Lang LaSalle forecast prices could fall up to 20 per cent as developers cut prices to support sales.
The consultancy, however, believes that the mainland housing market could withstand the sharp fall, regarding it as a correction rather than a collapse.
'Developers will be more flexible in pricing,' said Michael Kalibaner, head of Jones Lang's China research. 'But we don't see any reason why the prices should go down further.'
Beijing's curbs on the property market have resulted in a housing price drop and shrinking transaction volumes in the second quarter as would-be homebuyers stayed on the sidelines.
In Shanghai, prices of new apartments have dropped 16.3 per cent from the March quarter, according to consultancy Savills, which predicted the market would remain weak in the remainder of the year due to policy uncertainties.
Albert Lau, the managing director of Savills Shanghai, said housing prices in the city's non-prime-location areas could drop 15 to 20 per cent in the coming months while a rebound would not occur until next year. 'The economic outlook is still cloudy,' he said. 'It will take some time before the recovery of the housing market is in sight.'
China raised minimum down-payments early this year to curb speculation in the property sector.
The central government is expected to roll out more austerity measures to squeeze out asset bubbles, including the introduction of a property tax.
Some developers may have to offer discounts to woo buyers in the coming months as they are desperate to boost cash flow after banks took a cautious stance on granting loans to them, the two consultancies said.
In Shanghai, new home sales totalling 3 million square metres were completed in the second quarter, a year-on-year drop of 54 per cent, according to Savills.
Pre-owned home sales in the city fell 60 per cent from a year ago to 2.3 million square metres.
Both consultancies are bullish about the long-term prospect of the mainland's housing market, believing the increasing demand for dwellings in the world's most populous country will fuel the development of the sector.
'The policy orientation is to curb speculative mood or excessive demand for houses,' said Lau. 'However, it is more advisable to largely increase housing supply to cap the wild price growth.'
