House prices in Shanghai may drop in Q3
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Weak momentum among home buyers and the Chinese central bank curbing credit from the start of this year might cause price cuts for houses in Shanghai's suburban areas as early as the third quarter, analysts said.
"Price decreases of between 10 and 20 percent from the current level may occur in some housing developments beyond the city's Outer Ring Road in the second half while those within the ring may maintain their prices due to improved infrastructure and mass transport system," said Xue Jianxiong, an analyst with China Real Estate Information Corporation, a property information, consulting and online services provider.
"The coming few months will be very important as transaction volumes in March and April usually help set the tone for the whole year for the market and it still remains unclear whether further measures to cool the market will be introduced or not," Xue said.
In Shanghai, sales of new homes, excluding those designated for relocated residents under urban redevelopment plans, fell to 993,000 square meters in the first two months of this year, a record low in the city, according to Shanghai Uwin Real Estate Information Services Co. In the secondary market, sales also dropped sharply from the same period a year earlier, major property agencies said.
"Buyer sentiment would probably remain low in the first six months of this year and we expect volume for the whole year to tumble as much as 40 percent from 2009," said Shao Minghao, a research head at Shanghai Hanyu Property Consulting Co, operator of the city's third-biggest brokerage. "Price cuts, up to 20 percent in extreme cases, will likely occur initially in some new housing developments and expand to the secondary market later."
The government has recently taken firm steps to tighten credit that will impact on the cash-intensive real estate industry.
It has asked banks to put aside more money with the central bank twice this year, raised the issuance rates on central bank bills and limited their lending through window guidance.
