MOODY'S Investors Service forecasts a "moderate downward correction" in China's property prices in 2011 as regulatory measures are effectively enforced.

"As the most recent set of regulatory measures are more effectively enforced, there emerges the high probability that contracted sales value for Moody's rated portfolio will drop 15 percent to 20 percent year on year in 2011 with respect to current projects," said Kaven Tsang, a Moody's analyst, in a report yesterday.

The central government has made it clear that it intends to do everything possible to deflate a bubble in the real estate market, including raising mortgage rates, withholding home loans to buyers of third homes and capping housing purchases.

"This scenario is manageable for most of our rated developers," said Tsang. "Thus, a stable outlook for the sector remains appropriate, assuming the absence of any further drastic regulatory measures, and which we think unlikely at present."

Moody's rating on 23 Chinese property developers ranges between Baa2 and Caa1. It rates 65 percent as having a stable or positive outlook, while the remaining 35 percent with a negative outlook are challenged by high debt leverage profiles, aggressive growth, or weak sales.