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JPMorgan Warns China of up to 20Pct Slump in Property Prices

03-20 16:46 Caijing
China's property prices will fall as much as 20 percent in major cities, JPMorgan's chief economist Zhu Haibin warned

China's property prices will fall as much as 20 percent in major cities, JPMorgan's chief economist Zhu Haibin warned, calling the property sector the biggest domestic risk in 2012.

Mr. Zhu projected the average property price to fall by 5 percent in the full 2012, and by 15-20 percent in the first-tier cities, but ruled out a possibility of a house collapse.

"In the second and third quarter in 2012, the property sector will see a relatively sharper decline in prices," he said, "we believe that there is still plenty room for prices to dip further."

Answering a Caijing reporter's question, Zhu said there had been no signs of a house collapse, and that the company was not short on China's property sector.

A recent report issued by the company also noted that chances for a market crash are slim, citing local governments' trade-offs with Beijing.

Prices in 45 among the 70 cities monitored declined in February from the previous month, with prices in 21 cities remained flat and four cities on the rise, according to a new-home price index released by the National Bureau of Statistics.

Measured year on year, 27 cities compared with 15 in January saw declines in property housed, including Beijing, Shanghai and Shenzhen.

Chinese Premier Wen Jiabao reiterated the government's stance in property curbs at an annual parliamentary conference on March 14, stressing that "housing prices have been far from returning to a reasonable level", which, according to the premier, should be gauged by the price to income ratio.

According to JPMorgan, the ratios stood at 23 in Beijing, 16.3 in Shanghai and 17.2 in Hangzhou, ending 2010, compared with an accepted range of 6-8 which was calculated by Mr. Zhu.

"We believe that a moderate correct in prices could help China obtain a reasonable target of price-to-income ratio," he said, "If income grows 12 percent this year, the price to income ratio is expected to hit 8 percent."

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