BEIJING: Chinese home prices are likely to rise only by a sliver of 0.5 percent in 2014 as a housing downturn deepens, a Reuters poll showed, though a market collapse is seen to be highly unlikely.
The median forecast of 15 analysts showed that market watchers have cut their bets for the once piping-hot sector as sales and prices turned south: Just three months ago, analysts polled had thought home prices will rise 4.3 percent this year.
Yet the cooldown, expected to run into next year when prices are forecast to remain flat, should be contained. Looser monetary policy and a relaxation in property controls by regional Chinese governments is likely to put a floor beneath the housing slump.
"Recent measures including a relaxation of home purchase restrictions and looser credit conditions will steady home prices in the second-half of the year," said Liu Yuan, a research head of property consultancy Centaline in Shanghai.
A major driver of investment in China, the housing market poses one of the biggest risks to the world's second-largest economy this year, when growth is seen grinding towards a 24-year low.
Weighed by excess supply in some cities and economic uncertainties, the property market has lost momentum since late 2013. Home prices fell 0.5 percent in June from May, though they were still up 4.2 percent from a year earlier, data released earlier this month showed.
DOWNTURN CONTINUES
Nine of 16 respondents thought the market would not bounce back any time soon as the slowdown may last for at least a year.
"The market may get a brief respite in the second-half of this year, but the adjustment will continue in the medium term," said Harrison Hu, an economist at UBS in Beijing.
Given that China's property market is diverging between cities in terms of performance, analysts thought smaller cities would see deeper price drops in the second-half of this year.
Cities struggling with large inventories of unsold homes, such as Hangzhou and Wenzhou in south China and Hohhot in the Inner Mongolia region in the north, could see average price declines of 10 percent, the poll showed.
In terms of what China's central government was likely to do to support flagging home prices, analysts were evenly split. Half of the 16 respondents thought authorities would act to lift the market, while the rest believed they would not step in.
Most analysts also thought China's home prices were overvalued. On a scale of 1 to 10, with 1 being extremely undervalued and 10 being extremely overvalued, analysts rated Chinese home prices a "7".
To shield the economy from further headwinds, at least 20 regional Chinese governments in small- to mid-sized cities have openly or quietly relaxed home purchase restrictions this year to boost the property market.
Banks have also revved up lending to the industry. New loans issued to the real estate sector jumped 18 percent in the first six months of 2014 from a year earlier, and some banks have begun discounting their mortgage rates to first-time buyers.
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