Experts see lengthy downturn, but no collapse for China's property sector

Be prepared for the downturn in mainland property to last for several years, but fears of a market collapse are overblown, industry consultants say.

While it is inevitable that home prices will consolidate, they say the central government is likely to show some flexibility in allowing an easing of cooling measures for some cities amid a slowdown in the mainland's economy.

Officials would also seek to avert a hard landing in the market, they add.

More resilience is expected to be seen in first-tier cities and major second-tier cities, given the limited supply and strong demand.

Since the start of this year, the housing market has experienced downward pressure, hit by the tightened credit from banks to property-related companies, corporate bond defaults and a high-profile anti-corruption drive.

Falls in new home sales in the first quarter were sharpest in the first tier cities, where transactions plunged 32.2 per cent year on year. The bigger second tier cities recorded a 21.1 per cent decline, with the lower rung of second tier cities seeing a 7.9 per cent drop. The downward trend has since slowed in the mainland's housing markets, DTZ says.

"We are expecting that the central government will allow more tolerance on relaxation of the local cooling measures for cities which rely heavily on the real estate industry," said Alan Chiang, DTZ's head of residential, Greater China.