Analysts say investors will still enjoy decent rental returns as they wait for mainland market conditions to improve While a bearish sentiment is expected to prevail in the mainland housing market over the next few months following government efforts to check soaring home prices, property experts are advising investors against panic selling. They pointed out that, with no new taxes introduced on rented properties, investors could continue to enjoy a stable income from rents while waiting for housing market conditions to improve. However, they advised those looking for quick profits to turn to commercial properties, where the growth potential is high because of the strong economy. There is consensus that the China property market is unlikely to crash. Michael Choi Ngai-min, chairman of Land Power International, said now was not a good time to sell. 'You won't get a fair price in a falling market,' he said, adding that investors would not find it easy to offload assets in a slow-moving market. 'I expect home prices to continue to fall another 5 per cent on average over the next few months,' he said. 'The decline in some luxury properties, where we saw exceptionally high prices, will be even greater. But the market will be more stable after the short-term fluctuations.' The central government introduced austerity measures early last year, mainly by tightening land supply, but these failed to slow rising prices. In March, Premier Wen Jiabao expressed concern over soaring property prices. The State Council and the State Land Bureau then jointly released an announcement asking government officials to step up efforts to curb property speculation and soaring prices. This time, the measures focus on tightening mortgage lending and increasing transaction costs. The measures have hit Shanghai the hardest over the past two months, followed by other eastern cities such as Hangzhou and Wenzhou. Average prices in Shanghai fell 9per cent last month from March to 8,097 yuan per square metre, according to eHomeday.com, Shanghai's biggest property news portal. Estate agents said the properties which suffered the greatest price falls were those that had earlier seen the fastest rises - medium to high-end units in Shanghai priced at more than 15,000 yuan per square metre. Mr Choi said Shanghai had been hard hit because of fast growth on the back of overwhelming buying by investors from Hong Kong, Taiwan and Southeast Asia betting on an appreciation in the yuan. Shanghai prices jumped 19 per cent in the first quarter, according to a survey by the National Development Commission. Prices in Beijing and Guangzhou rose 6 per cent and 4.8 per cent, respectively. Andrew Ness, an executive director of research at CB Richard Ellis, said overseas investors should not be overly worried about the short-term decline. With gross rental yields of around 6 per cent investors would enjoy stable rental incomes while waiting for a market recovery, property consultants said. Under mainland regulations, flat owners must pay 12 per cent of their rental incomes in property tax. Mr Ness advised investors who feel uneasy over the market's outlook to consider opting for half of an office floor in the central business district of Shanghai or other big cities, such as Beijing. 'The [office] selling price in Shanghai is about US$2,500 per square metre,' he said, pointing out that medium to high-end residential properties in the city cost about the same. He said overseas institutions were shifting their focus to commercial properties, and advised small investors to follow suit. Wang Chengqing, an economist at the Chinese Academy of Social Sciences, said financially secure owners should hold on to their properties as long-term investments. 'We may see a price fluctuation in Shanghai in the next two years but the long-term outlook is promising, with eastern coastal cities driving the economy,' he said. Mr Wang and his colleagues recently wrote a largely optimistic report on the China property market. Andy Xie, chief Asia-Pacific economist for Morgan Stanley in Hong Kong, said China was not likely to exert a firm grip on the property market over the long term because the sector was an engine of the national economy. Real estate accounts for a fifth of the country's fixed-asset investments. China's economy grew 9.5 per cent in the first quarter, the government reported.