InfoGraphic

Housing price drop unlikely

By Chen Jia (China Daily)
Updated: 2010-05-06 09:38

Central bank statistics show that new yuan loans to the real estate sector reached 845.7 billion yuan ($124 billion) in the first quarter, with outstanding loans rising 44.3 percent year on year. It was 6.2 percentage points higher than the end of last year. New loans for individual home purchases increased 53.4 percent year-on-year by the end of March, 10.3 percentage points higher than that at the end of last year.

Hong Kong-based economist Paul Cavey has said current policies toward property can't be sustained.

Tightening measures could be reversed in the fourth quarter, when the government has evidence that the market has cooled, Cavey was quoted as saying by Bloomberg.

"A big slowdown of property seems inconsistent to us with 8 percent growth, and so we would expect policy to reverse," Cavey said.

"If we do see a pretty serious correction in the property market, banks' balance sheets will likely be severely impacted and this could at some point, necessitate bailouts," Charlene Chu, a senior director at Fitch's financial institutions ratings team in Beijing, said on a conference call.

"The problem is there is a very high indirect exposure to the property market, mainly through corporates who have taken out loans and used that money for property investments or developments of their own," Chu said.

Macquarie Securities Ltd forecast on Wednesday that the government is likely to reverse policies cracking down on the property market because they will put the nation's 8 percent economic growth target for this year at risk.

The economy expanded 11.9 percent in the first quarter from a year earlier, the fastest clip in almost three years.

Bloomberg contributed to this story.