Despite the recent set of tightening measures introduced by the central government, residential prices in Shenzhen, Shanghai, Guangzhou and Beijing are not expected to see more than 20 percent decline in 2011, said Knight Frank in a recent report.
The outlook for the China property market depends on developers’ liquidity, new homes supply and the implementation of the tightening policies, said Knight Frank.
The latest measures included prohibiting commercial banks from granting mortgage loans to people with two or more residential homes, limiting the number of units that every resident household can buy in cities where prices have been rising rapidly or are too high, and lifting the down payment ratio for first-time home buyers to 30 percent or above.
By end-October, 14 cities had announced bylaws in implementing the policy limiting home purchases. However, details of such bylaws differ from city to city. Fuzhou, Shenzhen and Nanjing have banned people with two flats from home purchases, and the first two cities have also prohibited certain non-resident households from purchasing homes in these cities.
The remaining 11 cities, which include Shanghai and Beijing, have embraced a less stringent approach in implementing the policies. They have allowed every resident household to acquire one more home, regardless of the number of properties they already own.
Knight Frank believes that a major correction in home prices can be prevented if some of the policies are adopted loosely. Cities that took a strict approach to implementing the policies will likely face a severe housing shortage.
These cities will not likely see a decline in home prices, as the impact of the policies would be offset by the dearth of new flats.