Property market heading for collapse

  The dynamics of China's property market are becoming more complex as the sales of apartments decline dramatically with little sign of a price drop, more than two months since the central government issued a set of measures to tackle soaring prices.
    While officials pledged tougher measures to rein in realty prices in the coming three months, analysts warned against a rebound of prices if fundamental problems are not addressed.
    Apartment sales totaled 33 million yuan ($4.8 million) in May, 11 million yuan less than a month earlier, according to the National Bureau of Statistics (NBS).
    In first-tier cities, the number of apartments sold dropped by more than 40 percent, according to a report by China Index Research Institute.
    Meanwhile, property prices in 70 of the country's largest and medium-sized cities rose by 12.4 percent in May from a year earlier, according to the NBS.
    Authorities reaffirmed their commitment to housing policies over the weekend as concerns grow over the government's effectiveness in dealing with rising prices.
    "House prices will decline in the fourth quarter this year, but how much they will drop by is uncertain," Xu Shaoshi, Minister of Land and Resources, said at a meeting Sunday.
    This is the first time a high-level official has directly said that housing prices will fall.
    In April, the government announced a slew of measures to tighten the property market, including raising minimum mortgage rates and down-payments to curb speculations.
    Despite the government's pledge and measures, players in the market adopt a wait-and-see attitude, with developers postponing the official sales date of new properties and buyers awaiting a possible plunge of prices in the near future.
    Fang Ying, a 25-year-old house buyer in Beijing, said she expected deeper cuts later this year.
    "Still, I don't think any decline would mean that I could afford an apartment not very far from the downtown area," Fang conceded. Fang earns approximately 4,000 yuan a month.
    While the sale of properties stagnates, the apartment leasing market has strengthened. In May, the average price of rent for apartments in major cities increased by more than 10 percent.
    Concerns persist 
    Yin Kunhua, president of the Shanghai Weston Real Estate Management Institute, said a lack of objective analysis of the property market will derail the national economy and fail to stabilize the much-maligned prices in the long run.
    "The primary cause of the soaring property prices is the insufficient land supply and the consequent imbalance in supply and demand. But the tightening polices failed to address those causes," he said.
    Meanwhile, Yin said, the current policies, which will possibly result in a decrease in supply of apartments, will instead push up prices eventually.
    Kenneth Rogoff, former chief economist of the International Monetary Fund, warned that China's property market is heading for collapse, which will derail the country's banking system, according to a Bloomberg report.
    "They have a lot of tools and some very competent management, but it's not easy," he said.
    In response to the remarks, Gu Yunchang, vice chairman of the China Real Estate Association, said that situation won't happen here since polices and actions have been implemented to squeeze out bubbles.
    "A property collapse occurs in the market where consumers stop buying houses and the price plummets dramatically afterwards," said Gu. "But in China, residents' demand for self-use instead of for speculation is so high that once it drops to a reasonable price, consumers will start to purchase."
    Li Jingguo, a realty expert at the Chinese Academy of Social Sciences, told the Global Times that it will take months before a deeper slump occurs.
    "Developers' wallets are full because of the booming market from the second half of last year to the first quarter this year. They have weights to counter government pressure," he said.