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Cooling Measures Finally Affect Chinese Property Market

News Posted On: 03 June 2011

There are signs that speculative house buying in China is on the decline and that the cooling measures implemented by the government in recent months are finally having an effect. Professor Nie Meisheng, president of the China Real Estate Chamber of Commerce has predicted there will be a 7% decrease in housing transactions and a 10% decrease in transaction values in 2011. He is predicting that house prices will fall by at least 10%.

Dong Fan, director of the Beijing Normal Universities Real Estate Research Centre, and Ba Shusong, deputy director of the finance research unit of the State Councils Development Research centre both agree with this prediction. The number of commercial bank loans being approved for property developers is also waning, and there have been rumours that the central bank has asked the commercial banks to suspend all loans to property companies. This has led analysts to predict that many residential property developers will experience financial problems later on in the year. It is expected that some could start cutting property prices as early as this month.

A report in the Guangzhou Daily newspaper stated that most commercial banks had exhausted their quota for property loans during the first two months of the year, and that since then most haven't given any new loans to developers. According to the newspaper domestic banks lent RMB 38.91 billion which is a decrease of 15.6% year-on-year. Loans from other financial sources totalled RMB 2.48 billion which is an increase of 5.6% year-on-year. The Chinese government is expected to continue tightening its grip on the property market, and many expect more cooling measures to be introduced.

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