CHINA will likely loosen its restrictions on the property market in the third quarter of next year, as plummeting prices could slow the growth of the economy, according to a report.
The report also said local governments might start to reverse curbs in the second quarter of next year due to their heavy reliance on land sales for fiscal revenue.
The latest round of correction in the domestic housing market is in principle a result of administrative policies, rather than a consequence of builders' asset-debt problems, Liu Yuanchun, deputy director of the Institute of Economic Research at Renmin University of China, said in the "China's Macroeconomic Analysis & Forecasting" report.
Property prices, sales and investment will fall in the first quarter of next year because of the government's tightening measures, the report said.
A 20 percent fall in housing prices will force the government to adjust its policies, as a steeper decline would bring economic growth below 9 percent next year, it said.
According the report, the policy shift will probably take place in the third quarter of 2012 when the central government will relax credit for the property market and loosen limits on home purchases.
Since April 2010, China has imposed a raft of measures aiming to cool down property prices. The measures include higher down payments, limits on the number of houses that people can own, the introduction of a property tax in Shanghai and Chongqing, and the construction of low-income housing.
In October, Chinese cities reporting a fall in new home prices finally outnumbered those registering growth, the National Bureau of Statistics said last week when it released its monthly report tracking 70 major cities.
Prices of new homes, excluding those of government-funded affordable housing, fell in 34 out of the 70 cities, compared to 17 in September.
In first-tier cities, including Shanghai, Beijing, Guangzhou and Shenzhen, where tightening mortgage requirements and home purchase restrictions have been rigorously enforced, new home prices finally fell last month from September - by between 0.1 and 0.3 percent - after remaining unchanged for three straight months, the bureau said.
During a visit to Russia earlier this month, Premier Wen Jiabao reiterated that the government will not waver on its tightening measures and pledged to bring prices down to a reasonable level.