Analysts expect property prices to fall in second half of 2010

The government will not end its clampdown on housing speculation even as the economy slows and developers who try to resist lowering prices are being unrealistic, according to Wang Shi, chairman of Vanke, the country’s top listed developer.
 
‘Property prices in some cities have risen to levels unacceptable to the middle class. Many developers who do not cut prices now are making a bet on policy,’ said Wang, suggesting that they were hoping that Beijing would back down on its property controls.
 
Vanke and other big developers, including Evergrande and Greenland, have cut prices, boosting their sales. The value of properties sold by Vanke in July rose 65% from a year earlier.
 
Showing its determination to cool the real estate market, Beijing has instructed banks to stop extending mortgage loans to people buying third homes in at least four major cities, including Beijing and Shanghai.
 
China’s property prices rose at the slowest pace in six months in July, climbing 10.3% but more cooling measures are unlikely, according to analysts.
   
‘I don’t think there will be further measures aimed at cracking down on the real estate industry. China’s housing demand is still there. We expect sales volumes will start to pick up soon with some slight drop in prices,’ said Shen Aiquin, a property analyst at GF Securities in Guangzhou.
 
The Shanghai Composite’s property index has dropped 23% this year as the government imposed higher down payment and mortgage rates for multiple home buyers and instructions for lenders to halt third-home loans in areas with excessive price gains.
 
Analysts also expect prices to fall in other parts of Asia. ‘Every market is a little different in the coming six months. Some markets might have policy risks and that would be for Singapore and a little bit from Hong Kong. And there will be some markets where policy risks have peaked in our view, like China,’ said Nicole Wong, regional head of property research at CLSA.
 
The main uncertainties are policy risks that are starting to unfold in China and especially as inventory starts to build up, you should see price cuts emerge in September and October, according to Eric Wong, head of Asia real estate research at UBS.