The Chinese property market is starting a collapse that will affect the banking system, said Kenneth Rogoff, an economics professor from Harvard University.
Property transactions have declined and prices are sluggish following the central government’s measures to cool the property market.
Meanwhile, Minister of Land and Resources, Xu Shaoshi said he expected a drop in prices in a few months.
“You’re starting to see that collapse in property and it’s going to hit the banking system,” said Mr. Rogoff, a former chief economist at the International Monetary Fund (IMF).
“Despite the importance of the property sector in the economy, we believe that the deflating of this bubble should have only a limited impact on the real economy and the banking system,” said Sun Mingchun, chief China economist at Nomura.
Meanwhile, a news report quoted a real estate association official as saying that tightening measures implemented by the government were yielding initial results.
However, prices in Tier-1 cities including Shanghai and Beijing had not yet dropped, thus officials had to intensify the implementation of tightening measures, which includes restrictions on lending to property developers, curbs on purchases of multiple homes, higher down payments and the end of mortgage rate discounts.