From Chinese Press

Will property prices drop?

(China Daily)
Updated: 2010-11-25 09:57

A report by the Institute of Economic Research of Renmin University of China,released recently, predicts that the real estate sector will face severe financing problems in the first half of 2011, causing property prices to drop by up to 20 percent, says an article in China Youth Daily. Excerpts:

Once in a while, experts predict a drop in property prices. This time some are saying it will drop by up to 20 percent next year.

The uncertainty of variables such as change in the monetary policy and control over the real estate market is rather strong.

But no one knows when the policy will be implemented and to what extent. Given so many variables, the prediction of a 20 percent drop is rather subjective.

Liu Yuanchun, deputy director of Renmin University's School of Economics said a 20 percent drop would be caused mainly by lack of liquidity. Real estate developers will reach their repayment peak at the end of this year. Because of the drop in sales, greater need for loans and the issuing of additional shares by listed companies, financial sources will start drying up.

That's fine. But when has money been a problem for the realty sector?

There's nothing wrong with an institute predicting a drop in property prices. But the problem is that people desperate to buy a house get excited by such predictions only to find that the prices have stayed the same or even gone up.