Mainland property stocks slumped yesterday after news agency 21st Century Media reported speculation that the government would cancel the pre-sale system, prohibiting developers from selling unfinished projects. News website Sina last night said a source from the Ministry of Housing and Urban-Rural Development denied the speculation, saying the government would not cancel the system because that would lead to a supply shortage and a surge in property prices. The report triggered a fall in mainland property stocks. Shares in Shenzhen-listed China Merchants Property Development dived 9.81 per cent to close at 21.06 yuan (HK$25.63), while China Vanke fell 6.75 per cent to 8.70 yuan. Shanghai-listed Poly Real Estate plunged 9.17 per cent to 10.30 yuan. Hong Kong-listed mainland developers also suffered, with China Overseas Land & Investment dropping 3.4 per cent to close at HK$17.70 and China Resources Land falling 4.63 per cent to HK$14.82. 'The rumour is ridiculous and malicious,' said Nichole Wong, regional head of property research at CLSA, adding that she believes the government would not forbid developers from pre-selling their projects. 'The government has to control the housing supply in order to check property prices. If developers are prohibited from selling incomplete projects, the existing supply of new housing will decrease by 90 per cent,' she said. 'Developers would need to wait three years to launch their projects', affecting their cash flow and putting many out of business, she added. The China Index Academy, an independent property research company, forecast the growth of property prices would slow between 2012 and 2016. Their compound annual growth rate during this period would be 5.5 per cent, compared with 9.1 per cent between 2005 and 2011. Huang Yu, executive vice rector at the academy, yesterday said: 'The government will continue to curb the investment demand for housing and the cooling measures will stay.' The investigation unit led by the State Council has visited Shanghai and confirmed the city had adopted effective cooling measures in the property market. The academy expects the sales volume of residential properties will increase to 1.4 billion square metres in 2016 from about 970 million sqmetres in 2011, while the completed residential floor area will increase to 2.76 billion sqmetres from 1.46 billion sqmetres.