China Home Prices to Fall by 10%-30% Next Year, Impact GDP, Barclays Says
By Bloomberg News - Nov 7, 2011
China’s home prices will fall as much as 30 percent in the next year, driven by the government’s housing curbs, according to Barclays Capital Research.
The correction in the property market will have an impact on the country’s economic growth, though is unlikely to lead to a financial meltdown, Hong Kong-based economists led by Huang Yiping said in the report today, citing the low leverage ratio of Chinese households.
“Prices are likely to correct more in large cities,” they said. “But it is also important to remember that the government’s purpose is not to crash the housing market, since that would cause devastating consequences for the economy.”
China’s home prices dropped for a second month in October, according to SouFun Holdings Ltd. Premier Wen Jiabao said last month the government will “firmly” maintain its control over the property market even as it seeks to “fine tune” other economic policies.
The government is likely to “micro-adjust” or even reverse the policy restrictions if home prices drop by 20 percent, as it will not “sit on the sideline to watch a free fall” of prices, the Barclays economists wrote.
A 10 percent to 30 percent decline in property prices would shave at least 0.5 percentage point to 1 percentage point of gross domestic product next year, Huang said in a telephone interview today. Barclays forecasts China GDP of 8.4 percent next year.
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