The Olympic party is over and, for property owners in Beijing, the hangover is just beginning. Helped by a 300 billion yuan (HK$342.39 billion) spending spree to prepare for the 2008 Olympic Games in the capital city, mainland property prices enjoyed spectacular growth. But as the Games budgets were spent and austerity measures took their place, the tide began to turn before the Games got under way. In Shenzhen, prices have plunged 30 per cent. Now developers worry that the turnaround is due to hit Beijing as well. Early signs are discouraging and data shows that deal volumes in Beijing and other cities used as Olympic venues fell 50 per cent last month compared with a year ago. This has sparked concerns that prices are due to follow transaction numbers downwards. However, views are divided on the future direction of housing prices in Beijing and other Olympic venues Shanghai, Tianjin, Qingdao, Shenyang and Qinhuangdao. Some analysts argue the government undertook measures to prevent - even temporarily - a steep fall in housing prices in Beijing and other major venues during the Games. So while prices plunged elsewhere as austerity measures were introduced, residential prices in Beijing and other Olympic venues dipped less than 10 per cent, they point out. 'Political unrest would have erupted if owners in high-profile cities began to fall into negative equity. More importantly, about 60 per cent of the annual income of local governments comes from the property market,' said an observer. They argue that with the pressing need to window-dress the market now gone, prices may be free to fall and local governments in some cities have asked banks to give some leeway to developers in an increasingly difficult operating environment. But Pan Minglang, senior vice-president at HKI China Land, a Hong Kong developer operating on the mainland, rejected speculation that the government ordered it not to cut prices. 'Home prices in downtown Beijing will remain stable in the next 12 months as new supply is limited,' he said. But other analysts disagreed with this optimistic view as they saw no immediate relief for tightening credit conditions, a drying up of liquidity and weakening demand. Last week, the country's banking regulator and central bank ordered commercial lenders not to lend money to developers for land purchases. The statement also encouraged banks to give preference to affordable housing projects. Economist Andy Xie said a general price decline was normal in the circumstances. 'Prices in Shenzhen have tripled in the past four to five years but Beijing prices have doubled in three years. There is less to fall in Beijing,' he said. 'But the supply overhang is serious. Since Beijing's secondary market is much smaller, it is up to developers to cut prices, which is happening much slower than in the secondary market. I think a significant decline is coming soon. When liquidity dries up for developers, they have to cut prices.' In July, prices in 70 major cities were up just 0.1 per cent from June, according to the National Development and Reform Commission. For the first seven months, developers had also slowed their expansion plans, investing 95.66 billion yuan in property development. Though that figure was up 6 per cent from the previous year, more recent data shows a declining trend with July investment levels of 16.22 billion yuan, down 15.6 per cent from a year earlier. As many developers reported first-half property sales reached only 30 per cent of their annual target, they would need to launch dozens of new projects by the end of the year to meet those goals, analysts said. Law Ka-chung, the chief economist and strategist at the Bank of Communications, believed the mainland property market was peaking almost at the same time as the A-share market. 'Who will buy when lots of money is tied up in a stock market that has nosedived?' he said. 'Falling property transactions have already sent a strong signal that prices will follow downwards.' Daniel Chan Po-ming, senior investment strategist at DBS Bank, believed it was unlikely that the central government would bail out the real estate industry. 'A market downturn will speed up mergers and acquisitions and create a healthy industry,' Mr Chan said. Li Wenjie, general manager at Centaline (China) in Beijing, expects prices will drop a further 10 per cent following a 10 per cent decline so far this year. In Shanghai, property transactions fell 70 per cent in August from the previous month, with deals falling to 7,000 compared with 20,000 in a normal season, said Clement Luk Shing, a director and assistant general manager at Centaline (China) Property in the city. 'It shows everyone is holding back his purchase and waiting for prices to come down.' In response to the softer demand, developers have marked down their asking prices for new projects by between 10 and 15 per cent. Yin Jehuan, deputy managing director at Centaline (China) in Tianjin, said prices in downtown Beijing dropped between 8 and 10 per cent after the central government introduced the cooling measures in October last year, while prices in rural areas fell 15 to 20 per cent. Cheng Chap-man, managing director at CB Richard Ellis' Qingdao office, said Beijing had turned quiet before the Olympics. But although transaction volumes in the mass residential market declined 30 per cent, prices remained firm. 'In the absence of investors, property prices in the city recorded an average gain of 10 per cent in line with inflation,' he said. Eric Chau Sai-wang, associate director at CBRE in Shenyang, said: 'We did not see a dramatic fall in prices as home values in the city rose only 20 per cent last year, compared with 30 to 50 per cent in other mainland cities. And investors are not active in the Shenyang market.'