China eyes mild property price fall in 2011

BEIJING: China's property prices will probably edge down in 2011 as authorities remain committed to squeezing speculators out of the market, mainly via monetary tightening steps, a top government think tank said on Wednesday, Dec 8.

Developers are expected to cut prices in the first three months to boost sales as their cash flow dries up, the Chinese Academy of Social Sciences said in a report, without giving a specific estimate.

But policy relaxation by local governments and surging pent-up demand may push up prices in the third quarter, which will eventually trigger a new round of tightening, it added.

"Speculative demand has been curbed and the shift in China's monetary stance will further limit loans to developers and mortgage borrowers next year," said Ni Pengfei, the main author of the report.

He added that China should set annual targets for property price increases, much as it does for consumer inflation and gross domestic product (GDP) growth.

His team recommended aiming for a 5% change in property prices, either up or down, and a 25% increase in real estate investment for 2011.

China started a tightening campaign to contain property inflation in late 2009, but housing prices have not fallen much, disappointing many people, said Wang Xiaohu, vice president of China's Land Society.

"The game is still going on and it's still too early to draw any conclusion about policy tightening," Wang added. — Reuters