Property regulation to continue in China

Beijing (CNS)--Regulation of the Chinese property market will continue into next year, according to Economy and Finance Outlook for the First Quarter of 2012, a report released on December 28 by the International Finance Research Center of the Bank of China.

Housing prices have dropped in an overwhelming majority of cities in China, and "the downward trend in real estate prices is spreading to more cities", says Bank of China.

Though the Chinese property market has passed a turning point recently, the control policies will not change in the short term. Due to the economic slowdown, tight credit and the carryover effects of the current policies, the real estate market will enter an adjustment phase in 2012.

Transactions had begun to decline since the first half of this year whereas the prices, which had remained stable at first, also started falling in the last few months in 2011. Zhen Feng, an analyst from the bank's International Finance Research Center figures that the significantly cooler 2011 Chinese property sector will keep the chill on into 2012.

Thirty-four out of 70 large and medium cities experienced month-on-month housing price dips in October but prices remained unchanged in 20 other cities. None of the cities saw home prices increase by over 0.2%.

Zhen estimates that the downward momentum of Chinese property prices will remain constant into the new year, and sales will plunge by 15% over the next 12 months but with the possibility of slight increases in the later half of 2012.

Regulation of the real estate industry has to manage the risks to economic growth, the development of commercial banks and the financing mechanisms of local governments in China. The research center reports that tumbling housing prices will influence the GDP via investment and consumption levels, and more importantly, will impact banking asset quality or even jeopardize local financial stability.