The slew of policy-tightening measures in China, aimed at preventing a bubble from bursting in the property market is likely to speed up sales of several projects, as property prices in top-tier cities decline, according to industry executives and analysts.
Since April, the central government has announced a set of measures to control the market, which include requiring banks to perform stress tests in case of sharp declines in housing prices and raising downpayments for home acquisitions.
China recently raised reserve requirements for six commercial banks by 50 basis points on a temporary basis in order to drain cash from the economy yet avoid overtightening.
“Some developers will speed up project sales from the second half of this year to the first half next year so as to reduce their reliance on loans from banks with the government’s measures to reduce liquidity,” said James Xia, chief executive of Evergrande.
Last week, Shanghai announced new rules limiting homebuyers to one new apartment and will implement a revised land appreciation tax.
With these cooling measures, top-tier Chinese cities will likely see a 10 percent decline in housing prices over the next 6-12 months, said ratings agency Standard & Poor’s.
Housing prices in top Chinese cities including Guangzhou, Shenzhen and Shanghai had slipped 10 percent by end-August from the peak in April, before the tightening measures began to affect the market, said Bei Fu, a credit analyst at S&P.
“We expect such corrections to deepen in the next 6-12 months,” said Ms. Fu, adding that the corrections would not be as sharp as two years ago.
“In 2008, we actually saw probably a 20, 30 percent downward correction in a time frame of 6-9 months. So this time, it’s going to be more moderate, kind of a gradual downward adjustment,” she said.
Some analysts also expect the tightening measures to affect the real estate market for months to come.
“We are not so optimistic on the short term, believing that the government will not easily surrender its current tightening efforts, which have a lagging effect, and will be felt more acutely in the first half of next year,” said Wee Liat Lee, property regional head at Samsung Securities.