July 6, 2010, 6:51 a.m. EDT · Recommend (1) · Post:
China on the cusp of real estate slump: Standard Chartered
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By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- Real estate prices in major Chinese cities are set to decline significantly in the coming months as developers grapple with bloated inventories and skittish buyers, according to recent research.
China's leading cities could see prices plummet 20% to 30% by year's end, while lesser-known cities could see declines of 10% to 20%, Standard Chartered Bank Ltd. said in a research note Tuesday.
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"With new supply meeting a still-reticent buying public, we believe developers will be forced to cut prices," said the bank's analysts headed by Steven Green in Shanghai.
Analysts say China's housing market turned lower after anti-speculative policies were unveiled in mid April. The regulations eliminated ultra-low mortgage rates, tightened down payment rules on purchases of second homes and luxury apartments and blocked bank financing for third-home purchases. In an effort to cool lending to the property sector, banks were required to set aside more cash as reserves.
From their highs earlier this year, real estate prices have eased about 20% in Beijing and 19% in Shenzhen, while in Shanghai they are off about 8%, though low transaction volumes may distort the magnitude of the drop, Standard Chartered said.
In fact, Green says overly-fast price declines could force Chinese authorities to abandon tightening measures and switch to a loosening stance by year's end.
"Market fears that overall policy would become even more stringent have faded over the past month," Green said in the note.
He added more cities are likely to follow Shanghai's lead in resisting the full implementation of the State Council's policies designed to curb prices.
Such delays in following the directive from China's top law making body "could suggest government reluctance to further dampen market sentiment," Green said.
In a further sign of weakness, about two-thirds of the 61 property developments in Shanghai and Beijing that were scheduled to be released for public sale in June had their marketing debuts indefinitely shelved, according to Standard Chartered.
Chris Oliver is MarketWatch's Hong Kong bureau chief. |
