China unlikely to see sharp correction in property prices

[BEIJING] China's property market is likely to see at most a moderate correction in prices in some small cities this year, according to a Reuters straw poll of 13 industry watchers this week, with a very slim chance of a sharp fall in prices nationwide.

A series of indications of a slowdown in the property market this week, beginning with official data and reports of banks cutting lending and developers cutting some unit prices, has spooked financial markets and raised concerns over the health of tone of the economy's main drivers.

Analysts in the poll said that the market had overreacted to the news as China's ongoing drive to have more people move to its cities, plus generally strong housing demand in wealthy cities, could put a floor on the downside risk. "We did see some corrections from certain development projects in some overpriced cities, but it doesn't tell the entire story of China," said Zhang Xiaoduan, head of South and West China Research at property firm DTZ. "The pressure for price correction is not particularly high for major developers thanks to strong sales performance from last year, which gives them a better liquidity position."