The head of China’s biggest real estate website is confident that China’s real estate market is not about to crash, but investors could be in for some tough times over the next 10-12 months.
Vincent Mo, who founded Soufun.com (recently renamed Fang.com) expects that China’s current decline in real estate prices is likely to continue until the middle of next year, and that the country’s housing could lose as much as 10 percent of its value during 2014.
Asked in an interview with Bloomberg TV how much China’s real estate prices could drop, Mo said, “for this year that’s five to ten percent.” So far in 2014, average home prices in China have already slid by 3.6 percent compared to last year, according to the Bureau’s reports, so the market could be in for even steeper drops in prices during the next few months, if Mo’s prediction is accurate.
Average home prices in China declined by 0.97 percent last month according to figures released by the National Bureau of Statistics, the fifth straight month that the Bureau had indicated a decline in prices. Private data provider China Real Estate Index System, which is owned by Soufun, indicated that prices fell by 0.9 percent during September.
Overall, Mo referred to the current downturn as “a slight correction, because the market had a rapid increase over the last two years.”
Government Working to Support Home Buying
While Mo says he sees the current slump lasting for several more months, the Chinese government now appears to be actively propping up the market in an attempt to support overall economic growth.
China’s State Council, the equivalent of the cabinet, said in a statement yesterday that China will “stabilize” home buying and will prioritise support for real estate development, along with five other industries, in an attempt to control the current economic downturn.
In the statement the State Council said that it would relax conditions under which consumers can use their housing provident funds, but did not give other details of how it would support home purchases.
During this month the number of cities providing discounted mortgages to eligible homebuyers has nearly doubled, from nine cities in September, up to 15 cities in October. China’s central bank announced in September that it would broaden eligibility for mortgage financing after restricting access to the home loans last year in an attempt to rein in then raging home prices.