China’s commercial property prices to fall next year as the liquidity crunch inflicts more pain on the industry

China’s commercial real estate which has emerged relatively unscathed in the property market slump could be hit further next year as investors and sellers face increasing liquidity pressure to offload their stock, according to investors and analysts.

Prices of these properties, which have been firmly held, were likely to drop because sellers “cannot hang in there longer”, said Zhou Songming, vice-president of EBA Asset Management, the real estate investment arm of financial conglomerate China Everbright.

“By next year, I expect that there will be much more for-sale assets with lower asking prices.”

By contrast, China’s residential property market has suffered a bigger decline in the past two years after the central government implemented home-purchase restrictions to halt prices from rising.

The deepening slump could weigh on Beijing’s effort to rein in prices without overly depressing growth of the sector, a key driver of economic expansion. Growth in property investment, which focuses on residential but also includes commercial and office space, slowed to 7.7 per cent in October from a year earlier, against the 8.9 per cent year-on-year rise in September, according to government data released last week.

Liu Wenxiao, a partner with Beijing-based private equity fund Xichuang Capital, said many sellers bought their properties a few years ago when funding costs were low, in the hope that their value would rise even if rental yields were low.