The Wall Street Journal
Home prices in China's major cities could fall 10% from current levels in the next six to 12 months, an analyst for ratings agency Standard & Poor's said in a teleconference Monday.
However, the decline could be as much as 20% if the government introduces drastic new tightening measures, the country's economic growth rate falls below S&P's expectations of a 10% expansion this year and interest rates rise sharply, S&P credit analyst Bei Fu said.
Her comments come after China announced new measures on Sept. 29 to cool its overheated real-estate market, including halting third and subsequent home purchases and raising the minimum down payment for all first time home-buyers. These moves added to measures introduced in April that included raising down payments on home purchases to 30% for homes bigger than 90 square meters.
Home prices in cities such as Beijing, Shanghai, Shenzhen, and Guangzhou are now down less than 10% from their peak earlier this year, S&P said in a report.
Fu said China's property developers are in a healthier position than they were 2008, when home prices fell 20%-30%.
She said many of them have adequate liquidity, have already locked in a majority of their revenue for 2010 and are unlikely to face severe pressure from the government's new tightening measures. She said S&P reiterates its stable short-term credit outlook for the sector.
Fu said it may be a while before the government introduces a residential real-estate tax as part of its cooling efforts, and such a tax would be levied at the local level in various parts of China before being expanded to cover the entire country.
"(A real-estate tax) is heavily discussed now, but it's only one of the many tools the government can use to manage the market," said Fu. "There are still no detailed implementation guidelines."
Christopher Lee, another S&P credit analyst, said local government officials have previously resisted changes to real-estate taxes.
Local governments derive most of their revenue from land sales, and are generally resistant to policies that could effect such income.
"We have not seen the full implementation of the land-appreciation tax across the cities," Lee said, referring to another property-related tax that was recently increased in some cities.
However, the decline could be as much as 20% if the government introduces drastic new tightening measures, the country's economic growth rate falls below S&P's expectations of a 10% expansion this year and interest rates rise sharply, S&P credit analyst Bei Fu said.
Her comments come after China announced new measures on Sept. 29 to cool its overheated real-estate market, including halting third and subsequent home purchases and raising the minimum down payment for all first time home-buyers. These moves added to measures introduced in April that included raising down payments on home purchases to 30% for homes bigger than 90 square meters.
Home prices in cities such as Beijing, Shanghai, Shenzhen, and Guangzhou are now down less than 10% from their peak earlier this year, S&P said in a report.
Fu said China's property developers are in a healthier position than they were 2008, when home prices fell 20%-30%.
She said many of them have adequate liquidity, have already locked in a majority of their revenue for 2010 and are unlikely to face severe pressure from the government's new tightening measures. She said S&P reiterates its stable short-term credit outlook for the sector.
Fu said it may be a while before the government introduces a residential real-estate tax as part of its cooling efforts, and such a tax would be levied at the local level in various parts of China before being expanded to cover the entire country.
"(A real-estate tax) is heavily discussed now, but it's only one of the many tools the government can use to manage the market," said Fu. "There are still no detailed implementation guidelines."
Christopher Lee, another S&P credit analyst, said local government officials have previously resisted changes to real-estate taxes.
Local governments derive most of their revenue from land sales, and are generally resistant to policies that could effect such income.
"We have not seen the full implementation of the land-appreciation tax across the cities," Lee said, referring to another property-related tax that was recently increased in some cities.
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