Shanghai's property market poses a key risk to the mainland's economic growth, economists warned yesterday.
'Shanghai is a huge risk factor,' Credit Suisse First Boston's chief regional economist, Dong Tao, told a briefing in Hong Kong yesterday. 'If the Shanghai property market falls, the national economy will be affected.'
Real estate prices in the mainland's financial hub have been sliding drastically since April following the introduction of restrictions by the central and local governments to curb speculation. They include forcing home owners to pay the balance of their existing mortgage before they can sell and imposing a capital gains tax on flats sold within a year of purchase.
Growth in residential real estate investment in Shanghai slowed sharply to 7 per cent year on year in the first four months of this year. Some media reports claimed the number of property sales in the city in May plummeted by more than 40 per cent.
The downward trend in the property market, which accounted for 13.5 per cent of Shanghai's GDP growth last year, was likely to continue, further denting the city's overall economy, Dr Tao said.
'We see a 60 per cent to 70 per cent probability of a 30 per cent-plus fall in property market prices there,' he said.
The triggers would include a crackdown on hot money parked in Shanghai in preparation for a revaluation of the yuan and a squeeze on the cash flow of real estate developers.