Beijing: China's home prices may fall by as much as 20 per cent in the second half, as government measures to curb credit, increase land supply and a potential property holding tax cool speculation, according to BNP Paribas.
"The State Council and political leadership have demonstrated a strong political will, at least at a central level, to curb the property bubble," BNP analysts Chen Xingdong and Isaac Meng said in a report yesterday. The cabinet "considers elevated property prices and further rises as not only economic- financial risks but also as undermining social stability."
Property prices in 70 Chinese cities surged by a record 11.7 per cent in March from a year earlier, prompting the government to announce measures last week that increased the size of down payments, raised interest rates on second homes and barred banks from funding purchases of third homes.
BNP joins Citigroup in predicting prices may drop as much as 20 per cent as tightening measures take hold. A "turning point" in the real-estate market is "unavoidable", Citigroup analysts Oscar Choi and Marco Sze said in a report yesterday.
China may tax owners of three or more homes, the Shanghai Securities News reported yesterday, citing unidentified people. State Administration of Taxation spokesman Niu Xinwen couldn't be reached on his mobile phone.
Tax to be trialled
The State Council has approved a real-estate tax trial in Beijing, Chongqing, Shenzhen and then Shanghai, the Economic Observer said yesterday.
China's property market has "gotten frothy" in some areas, though not yet a bubble, Goldman Sachs Group strategist Timothy Moe said in a Bloomberg Television interview yesterday.
China is "on a treadmill to hell", with growth driven by the "heroin of property development", hedge fund manager James Chanos said this month.
"We believe that the measures it has already put in place will soon be followed by higher lending rates," Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada, said in e-mailed comments.
The government measures on property are aimed at curbing house prices while avoiding a crash, said central bank adviser Li Daokui.
