The year of the Rat may not be a promising one for property developers across China. Tighter lending policies spell problems ahead for liquidity and financing. But it's not all gloom and doom, experts also think there is enough demand to prevent any significant price-falls.

After booming in recent years, China's real estate market is finally beginning to feel the pinch. Banks across the country are tightening lending policies and that means less credit all around.

Liu Guolin, Credit Manager of Agricultural Bank of China said "In 2008, we will make some new policies on housing loans. Generally, they will be tighter, especially in those areas with rapid price growth. We are also aware that most property developers have businesses throughout the country, so we will adopt different policies based on specific projects."

The Bank of Communications, China's fifth largest lender, has also announced plans to control the total amount of housing loans this year. The Merchant's Bank also says it will ensure that housing loans stay within a given proportion of its total loan structure. In 2008, developers are likely to feel the tightening trend even more in Shenzhen, Shanghai and Beijing, where property prices have received the greatest attention. Newly established property companies are also going to find it difficult to get necessary loans.

But there is some good news. So far, there have been no signs of a mortgage meltdown in China similar to what first seen last summer in the United States, and experts do not foresee property prices falling substantially. Strong economic growth and surging demand from upwardly mobile families are likely to keep demand up, especially for new houses.