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As Chinese Property Price Falls Harden, So Does Government Resolve

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China  Beijing  Chinese Property Market  Chinese Government  Wen Jiabao  Zhang Dawei  Centaline Property 

As Chinese Property Price Falls Harden, So Does Government Resolve

By - Tuesday 21 February 2012

Chinese property prices continue to fall, but the government remains stalwart in its determination to maintain the stranglehold it has on the once-runaway market.

Many have been surprised by the severity of the measures taken by the government, including a ban on mortgages for people who own more than 2 properties, increased down payments for second homes and even new taxes.

Surprised, because Chinese house prices were growing at just 7% per year on average, and many believe this was sustainable given the huge population and rapid economic growth. However, the Chinese government is communist, the wealth gap in China is huge and many people were being priced out of the market -- especially in top-tier cities like Beijing.

Now, most experts on the property market, including Zhang Dawei, market research director for China's largest realtor Centaline Property believe that, not only will the government maintain the restriction to see out the year, but that prices could fall drastically as a result.

“I think prices will continue to fall by 10-20 percent over the next 6-12 months,” Zhang told the Beijing News. He expects there to be no let-up in home-buying restrictions this year, saying that it’s obvious that a turning point in the housing market has arrived -- in particular in first-tier cities.

Despite the fact that the Chinese property market is performing worse than it has for a year, with prices falling in 48 out of the 70 cities monitored, and growing in none, the indications are that the government is indeed intent on maintaining its policies for the foreseeable.

On top of the fact that the government said as much at the Annual Central Economic Work Conference in Beijing, when it said: "China will stick to property tightening policies, push home prices back to reasonable levels and speed up construction of ordinary commercial homes to increase effective supply". And it being reaffirmed by Chinese Premier Wen Jiabao earlier this month, when he said that China would consolidate its property tightening campaign and bring about a "reasonable" correction in housing prices. We now also have some hard evidence of this in action.

Third-tier city Wuhu had talked about easing the restrictions on its property market, but in the last week said that it has been forced to abandon the plans. Meanwhile Beijing has firmly said that it will not ease up on its policies of making housing cheaper.

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