BT : China housing prices to start dropping in Q4

Business Times - 24 Aug 2010

China housing prices to start dropping in Q4

BEIJING - Chinese property developers are facing strained cash flows and will be forced to cut prices beginning in the fourth quarter, a state newspaper reported on Tuesday, citing several bankers.

Beijing has strictly controlled financing to real estate developers by limiting their lending from banks and fund raising from capital markets, part of its efforts to cool speculative purchases and prevent prices from rising too fast.

'As far as we know, property developers are feeling very strained cash flows now and many of them have made preparations to tighten their belts,' the official Shanghai Securities News quoted an unnamed executive at the Shanghai branch of China Everbright Bank as saying.

Property developers purchased a large amount of land lots in 2009 when the market was booming. Under current regulations, they are not allowed to hold land for a long period of time without developing it and have to speed up construction. That will likely increase the supply of housing in the coming quarters, the newspaper said.

'Housing prices will probably show an evident drop as early as from the fourth quarter,' the newspaper quoted another unnamed banker at Shenzhen Development Bank as saying.

Earlier this month, the National Bureau of Statistics reported that housing prices in 70 major cities were unchanged in July from June.

But the National Development and Reform Commission said property prices in 36 key cities actually rose 1.6 per cent in July from June. -- REUTERS

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