(ECNS) -- China's property market may see a short-term adjustment in the last half of 2016 and the first half of 2017, as the risks of loan defaults by small- and medium-sized property developers increase, warned a housing report by the National Academy of Economic Strategy at the Chinese Academy of Social Sciences on Wednesday.
The current rising property market that began in the second half of 2015 was mostly driven by government stimulus, said Ni Pengfei, assistant president at the NAES. He expects a large supply of newly developed property to hit the market this year, the Economic Information Daily reports.
Many uncertainties remain in the sector with property sales and prices rising in first- and second-tier cities, but under great pressure in third and fourth-tier equivalents with huge inventories.
From January to April, growth in home sales in major cities was 10 percentage points higher than smaller cities. Investment by developers in non-major cities grew 7.8 percent over the same period last year, 1.1 percentage points higher than major cities, the paper said.
Data shows that by April, the total square footage of new projects rose 21.4 percent, up 2.2 percentage points from the first quarter. Growth was slightly slower in May but remained high at 18 percent. Ni said he is concerned that new construction would add even more difficulty in absorbing inventories in non-major cities.
An earlier report by CICC Research pointed out that China's property market would see a new round of supply outstripping demand as more new houses go onto the market in the fourth quarter.
As a result, the risk of loan defaults by property companies may increase, especially small and medium-sized firms in third- and fourth-tier cities, which may have obtained credit through non-bank financing channels, Ni warned.
