Reports indicate housing prices may decline as much as 20 percent

BEIJING - Restrictions on China's residential property market are causing it to experience its coldest winter in a decade.

And analysts say 2012 will be an even tougher year.

By Wednesday, sales contracts for 9.4 million sq m of new homes had been signed in Beijing and an estimated 9.5 million sq m worth are expected to be signed by the end of the year, according to a report by the Beijing-based Centaline China Property Research.

That area is 23 percent smaller than it was last year and is likely to be the smallest in the past 10 years.

The data are even less promising than they were during the 2008 downturn, when the total area contained in new homes sold was about 2 million sq m larger, the report showed.

This year is expected to see sales of about 90,000 new apartments and houses, 18 percent fewer than the 111,000 that were sold last year and almost half of the 179,000 sold in 2009.

Even so, 124,200 are still for sale, according to data from the Beijing property market regulator's website. That number has increased by one-third since the property restrictions took effect in February.

While fewer new properties are being sold than at any other time during the decade, the demand for used properties has also decreased greatly in the past three years.

The Beijing Construction Committee reported that 121,000 second-hand properties had been sold this year, 38 percent fewer than in 2010.

According to the latest statistics, the average price of second-hand properties in Beijing had stood at 21,550 yuan ($3,407) for a sq m by the end of November, 2.4 percent below what it had been in the previous month. That was the third month in a row that it had declined.

Meanwhile, Centaline said the prices on 99 percent of the properties now for sale in 730 new residential projects in Beijing have also stopped climbing and 116 of those properties are being offered at "obvious price cuts".

Those trends are not unique to the capital city.

The prices of homes in three other large cities - Shanghai, Shenzhen and Guangzhou - each decreased by 0.3 percent last month from October, the biggest monthly declines this year.

Centaline said Beijing's home prices may drop as much as 20 percent next year as China's property restrictions strain developers' finances and stamp out speculation, Bloomberg reported.

The prediction accorded with one made by Carlby Xie, head of research at the real estate consultant Colliers International (Beijing), who said Beijing's average home price will probably fall by 15 percent to 20 percent next year.

"The policy framework in conjunction with the expanded inventory should place more pressure on developers' shoulders and lead to a further cut in sales prices in 2012," Xie said.

"2012 will definitely be a more difficult year for property developers," said Mao Daqing, vice-president of China Vanke Co, the country's largest property developer. "The rules of the game have been changed, and we now need a new discipline to stand out."

According to research from the global real estate broker Colliers International, the value of new property-related loans came to 992.3 billion yuan from January to September, which was down 42.8 percent from the year before. Colliers said one cause of the decrease was the rising cost of financing.

Centaline said Chinese developers have raised more than 90 billion yuan from transfers of equity and asset sales this year, six times the value of their acquisitions this past year. Both a decline in revenues and restrictions on lending have added to their difficulties with cashflow.

The company said the country's real estate polices have caused speculators to go "nearly extinct" in Beijing, noting that more than 90 percent of the homes sold there in 2011 went to first-time buyers, compared with 60 percent the year before.