China property prices to come down in 2011: Moody's

The world's leading rating agency Moody's said that China's property market has experienced asset bubbles during the past 18 months, but government intervention to cool down the market will help stave off a big downturn in the housing prices.

In a report released yesterday, the agency said it expected a "moderate correction" in China's housing prices in 2011, but added that it would be offset by prudent government regulation and higher liquidity levels among the developers.

"The improved liquidity positions of developers – resulting from robust sales over the last year – and the low debt leverage of buyers together reduce the risk of any panic sales, therefore helping avoid any drastic correction," the Moody's said.

The report said that it is possible that the housing prices could come down by 15 to 20 percent year-on-year in the coming 12 months.

The Moody's report said lackluster performance in China's stock markets and a broader lack of alternative investments in China had promoted a flow of speculative capital into the property market.

A supply shortfall in 2009, along with government's austerity measures implemented 2007, had led to asset inflation that year.

However, recent government intervention aimed at curbing speculative investment looked set to benefit the sector in the long term, the Moody's said in the report.

The measures sought to increase the cost of housing transactions, penalize land hoarding by the developers, increase supply of affordable housing and delay approval of pre-sale permits for "deluxe properties".

People's Daily Online