Property prices in China could fall by as much as one-fifth over the coming year as demand for housing begins to tail off, claims Premier Asset Management’s Fen Sung.
Investors’ concerns of a property bubble in China have grown over recent months. The International Monetary Fund also highlighted a potential correction of the country’s high real estate prices as one of the main risks to its financial stability last month.
Sung, the manager of the Premier China Enterprise fund, expects Chinese property prices to fall by up to 20% in 2012 and has been scaling back his real estate holdings in anticipation of this correction.
“Developers are struggling to get funding and therefore have turned to the shadow banking sector. Ten million social houses have been targeted to be built this year but only around 40% have been built,” he comments.
The latest China Real Estate Index System, which is affiliated with Chinese real estate company Soufun Holdings, shows the country’s house prices fell for a third month running last month.
Home prices dropped 0.28% in November, following the 0.23% fall in October. The Chinese government recently embarked on a series of moves to curb soaring housing prices, including increasing mortgage rates and implementing a property tax.
Sung adds that that he will not increase his holdings in Chinese real estate until valuations are more attractive. Instead, the manager is adding to his positions in energy and consumer stocks, which he expects to benefit from the country’s work to rebalance its economy towards greater domestic demand.
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