Chinese admit property close to ‘turning point’

Property prices in China are approaching a “turning point”, the country’s central bank last week admitted for the first time.

Recent declines in real estate prices, property investment levels and land transaction volumes are the reasons for the Pexople’s Bank of China’s changed outlook.

Officials from the bank met the country’s banking regulator, 10 commercial lenders and university academics last month to discuss the problem. (article continues below)

“The turning point of property prices is emerging,” the bank’s report of the meeting says, although it does not recommend any policy action.

Julian Chillingworth, the chief investment officer at Rathbone Unit Trust Management, says the risk of a property bubble in China is a “real issue” for the country, but argues that the situation is “not totally disastrous”.

“There’s pockets of big over-valuation there and a number of the housebuilders are setting on a lot of stock so there’s the possibility of quite big cuts in the price of new property in China,” he explains. However, he adds that China will be able to manage its way through its property sector problems as the authorities have effective control of the banking sector.

Last week the China Real Estate Index System showed house prices fell in November for a third successive month. Home prices dropped 0.28%, following a 0.23% decline in October.

Meanwhile, Fen Sung, the manager of the Premier China Enterprise fund, predicts Chinese property prices could drop by up to 20% next year when demand tails off as more social housing is completed.

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