A potential homebuyer said, "I think prices will go down further. The discounts here are just small ones, and only on properties far from the city center. I will be just watching, not buying."
But developers argue that the government's latest policies, which were a strong signal of support for the market, will help turn around the falling prices.
A property developer said, "We understand people are still waiting, that's why we are offering discounts to let some start buying. The demand is still there, as you can see from the crowds here visiting the show. And the new policies will unleash the demand and prop up the market."
A recent housing market report from the research arm of the Bank of China has drawn much attention from the sector. According to the report, over the next two years, housing prices in China will drop 10 percent on average, and up to 30 percent in places where prices had spiraled out of control. Analysts say banks are worried about the market, because they are heavily exposed to lending risks.
Wen Bin, senior analyst, Bank of China Intl. Finance Research Inst., said, "What I worry about is that some mortgages may go bad and increase banks' risks. But bigger risks lie in loans given to small and medium real estate developers, who make up the majority of the sector and are the major borrowers. Once their cash flows hit problems in the sliding economy, banks have to be really careful about the loans."
Currently, housing loans to homebuyers and property developers account for a fifth of commercial banks's lending portfolios. In some small banks, that rate is as high as 40 percent. Bank of China's report warns commercial banks of the growing risks in a possible slowdown of Chinese economic growth.
(CCTV November 3, 2008)
