After nearly two years of government efforts to curb the property market, China’s housing prices may likely fall to within home buyers’ reach.
Home purchases are falling in many cities and many developers are affected by higher borrowing costs and the credit crunch. Several analysts said property companies may be forced to slash prices due to the government’s firm grip on the market, which saw the implementation of reduced liquidity and purchase limits in most cities.
Figures from Basic-5i5j, a major property sales and consulting firm based in Beijing, showed that the contract sales for new homes in Beijing stood at 2,056 units in the first half of September, down 16 percent from the first half of August.
It also showed that sales of new and existing homes dropped 26.4 percent month-on-month to 13,000 units in August, the lowest since 2009.
Meanwhile, prices of new homes fell 2.5 percent from July, while prices of second-hand homes slipped 0.9 percent in August. Shenzhen and Shanghai also saw sluggish housing sales, while sales in other cities have started to drop after resisting government controls for months.
According to the latest figures released by the National Bureau of Statistics, 46 out of 70 major cities saw new home prices decline or remain unchanged from August, compared to 31 cities in July.
“The reason why housing prices are so difficult to tame is because of the record lending boom that occurred in previous years, local governments’ reliance on land sales for revenue and the expectation that housing prices will always continue to rise,” said Yin Zhongli, a real estate and financial expert from the Chinese Academy of Social Sciences, a government think tank.
Wang Pei, a property analyst from CEBM Group Ltd, said price declines will be more evident in 2013 after more low-income housing is introduced to the market.
Earlier this year, China announced it will develop 36 million low-income housing units by 2015, of which 10 million will be built this year.
The central government is hoping that these projects, which will account for 20 percent of China’s housing by 2015, will help the residential market.
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