BEIJING, Nov. 28 (Xinhuanet) -- The acceleration of housing price drop and apparent slump in real estate transactions in China’s first-tier cities indicate that its overheating real estate sector has become increasingly cooler. However, analysts have ruled out any possible burst of the Chinese real estate market.
In October, 34 cities in a statistical pool of 70 major cities saw declines in new home prices from September, compared with 17 cities in September, said the National Bureau of Statistics (NBS).
Prices of new homes in four of China's major cities -- Beijing, Shanghai, Guangzhou and Shenzhen -- saw overall month-on-month drops after staying unchanged for three months, with decreases of 0.1 percent in Beijing, 0.3 percent in Shanghai, 0.2 percent in Guangzhou, 0.1 percent in Shenzhen, according to Xinhua.
Besides, due to the tight monetary policy, developers are finding it difficult to access additional loans at a time when a sharp drop in real estate transactions means they have less working capital. Realty brokerages across China have closed down hundreds of offices, and some developers are starting to show signs of being bankrupt.
Developers' rush for sales has raised some concerns about a hard-landing of China’s property market. But it seems to be unlikely, some analysts suggest.
Firstly, the control target of sky-high house prices could hardly be reached overnight with many actions being short-term.
Prices are expected to reach a period of continued decline before finally reaching a reasonable level, said some analysts.
"As the country's property market wanes, housing prices in these major cities are now showing the apparent signs of a turning point, echoing the central government's campaign of calming the runaway property market," said Zhang Dawei, an analyst with Centaline Property Agency.
The mid-term property market control policies should last at least to the end of 2012. And the strength of this round of control policies should be carried on for three to five years in order to reach the government's target, Zhang stressed.
Secondly, some economists predicted that Chinese monetary policy would go back to neutral in the future, which means the central bank could loosen the interest rate policy
A recent report released by Beijing-based Renmin University of China forecast that China's economic growth will grow 9.2 percent in 2012, a slight drop from 9.4 percent this year.
According to Liu Yuanchun, deputy head of the School of Economics at the university, local governments, whose finances have relied heavily on land sales, could not bear more than a 20 percent dip in housing prices, while the macro-economy is unable to take drops of over 25 percent.
He predicted the government will finally loosen control over the real estate sector in the third quarter next year.
Meanwhile, six rural credit cooperatives in Zhejiang province on last Friday carried out a 50 basis point reduction in the reserve-requirement ratio (RRR) to 16 percent, according to Xinhua, citing the Hangzhou branch of the People's Bank of China, China’s central bank.
The move is being viewed by some observers as a signal of lowering the RRR for some other lenders and indicates limited loosening of monetary policy.
"We indeed predicted that China will loosen its monetary policies, but the government will not make the change high profile," said Wang Tao, head of China economic research at UBS Securities Co Ltd.
Thirdly, the government would continue to dampen real estate speculation and increase construction of affordable housing.
Premier Wen Jiabao said in Moscow recently that the tightened real estate regulations will not waver and the government aims to lead housing prices back to a reasonable level.
While it is the third time in a month that Wen has expressed the government's determination to continue with its efforts to cool the market, it is noticeable that this is the first time in years that the government has shifted from "curbing excessive growth in property prices" to "bringing prices down to a reasonable level", China Daily reported last Tuesday.
In addition, Chinese vice premier Li Keqiang Sunday emphasized that China's measures to control the property market are at a critical stage, stressing that the government should stick to its tightening measures and consolidate the regulative results it has achieved.
Li also called for increased efforts to build and fairly distribute high-quality affordable housing to low-income residents, which he said, would benefit both the people's livelihood and the economy.
The purchasing control policy has been tested as an effective measure to delay the release of the housing purchasing demand, said Chen Sheng, vice president of the China Index Academy.
It also leaves room for various levels of subsidized housing to feed some portions of social need, he added.
China is aiming to construct 10 million affordable housing units this year, of which 98 percent was commenced construction by the end of September, according to the Ministry of Housing and Urban-Rural Development.
The central government would seek a soft landing for the property market, said Li Daokui, an advisor to the monetary policy committee of the central bank.
A hard landing in the real estate market, as in the United States and some European countries, will lead to a series of social and economic problems, the advisor said.
As China's economy continues growing vigorously, it will take three years to defuse pressure related to the overheating housing market, he added.