Housing prices in top-tier Chinese cities will probably fall by 10 per cent over the next 6-12 months because of government measures this year to cool the red-hot sector, ratings agency Standard & Poor's said.
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
China's housing prices in top cities, such as Shanghai, Guangzhou and Shenzhen, had fallen by about 10 per cent as of the end of August from a peak in April, before the impact of tightening measures started to have a negative impact on the market, Ms Fu said.
"We expect such corrections to deepen in the next 6-12 months," Ms Fu said in a media teleconference after the ratings agency issued a report on China's property sector, although she added that the corrections would not be as sharp as in 2008.
The collapse of the property bubble would also bankrupt many local governments in China because they have been some of the largest land speculators. Their economic fortunes are tied to the continuation of the property bubble as they are heavily levered through off-balance sheet special purpose entities.
Black Swan Insights
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