Prices in 70 Chinese cities rose 12.4% in May, the 2nd-fastest pace on record
(BEIJING) China's home prices are set to fall as much as 20 per cent in a 'healthy' correction, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc.
China's property boom is 'cash-driven' rather than 'leverage-fuelled', which means there's only a low chance of the type of forced selling that exacerbated the US housing market collapse, he said in a Bloomberg Television interview yesterday.
That view contrasts with Harvard University's Kenneth Rogoff's prediction on Tuesday of a 'collapse' in China's property market that will hit the nation's banking system.
Property prices in 70 Chinese cities rose 12.4 per cent in May, the second- fastest pace on record, heightening concern a bubble is forming in the nation's housing market.
Shanghai's new-home sales fell 70 per cent from a year ago in June, Changjiang Securities Co said in a report on Tuesday, adding to signs government measures including increased interest rates and down payments on second mortgages are cooling the market.
'We actually expect a very healthy correction, something in the order of 15 or 20 per cent in terms of price correction,' Mr Klibaner said yesterday.
'But we don't see any reason why there will be a risk of a crash at the moment.' Jones Lang LaSalle is the second-largest publicly traded commercial property broker.
As China's economy develops, 'especially at the speed it's growing, it's going to have bumps', said Mr Rogoff, speaking in an interview with Bloomberg Television on Tuesday.
'You're starting to see that collapse in property and it's going to hit the banking system,' said Mr Rogoff, 57, the former chief economist of the International Monetary Fund.
Mr Klibaner's forecast echoes the view of Nomura Holdings Inc economists Sun Mingchun and Sun Chi, who said China's average home price may fall as much as 20 per cent in the next 12 to 18 months.
That won't have a big impact on China's economy, they said in a July 5 report.
Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 per cent annual pace in the first quarter, the most since 2007. -- Bloomberg
Source: Business Times, 8 Jul 2010