Property prices in China will likely drop by as much as 20 percent next year, as cooling measures start to take effect, according to a report from China’s Renmin University.
The report said a major period of readjustment will happen in March or April 2011, as the government’s measures such as monetary policy adjustment and constraints on prices set by property developers affect the market.
Liquidity available for property developers will dry up substantially in Q1 2011, said Li Yuanchun, deputy head of Renmin University’s School of Economics, adding that there will be tougher restrictions on property buyers and tightening of loan repayments.
Data from the National Bureau of Statistics showed that property prices in 70 large and medium-sized Chinese cities rose 0.2 percent in October month-on-month, compared to a 0.5 percent increase in September. The year-on-year growth in October reached 8.6 percent, the sixth consecutive monthly decline in a year-to-year growth rate from the 12.8 percent peak in April.
Among the recent cooling measures announced by Beijing include higher deposits for first-time buyers and a moratorium on loans for third home purchases. Some of the biggest trust companies in China have already stopped property-related lending and investment after the China Banking Regulatory Commission ordered them to assess real estate-risks in their portfolio.
“The CBRC ordered a self examination last Friday in a document and our application to invest in a property project was turned down by our company on the same day. I don’t know whether it’s a regulatory requirement or a decision by the company,” said a source at Ping An Trust in an interview with Reuters.