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Predicting the collapse of the Chinese property market has turned from an amusing guessing game into a vuvuzela-style buzz.
Government data released today shows prices nationwide fell 0.1 percent in June, which may not sound dramatic, except it was the first month-to-month drop since Feb. 2009.
Although prices are still up a robust 11.4 percent from a year earlier, the overall rate of inflation is slowing, down to 11.4 percent from a 12.8 percent, according to the National Bureau of Statistics. And real estate agencies and research firms reported a “significant drop in sales” in May and June, the Wall Street Journal reports.
At the very least, the numbers suggests recent government measures designed to slow the market are kicking in. Hoping to stem the huge increases, the government imposed higher mortgage rates, limited the purchases by non-residents and made it more difficult to purchase multiple properties, among other measures.
Meanwhile, stimulus programs implemented during the economic crisis are expiring, further slowing the market.
Pundits are already weighing in, trying to gauge whether this is the first sign of a bursting bubble or simply an indication the market is adopting a more normalized growth curve.
Standard Chartered estimates prices could fall by more than 20 percent in major cities, although, as noted by the Real Estate Channel, managing director Edmund Ho believes it will be a “soft landing.”
“We don't see a bubble,” Ho told a recent industry meeting. “What we've seen is a correction in the market."
Now the big question: Will the government continue to dampen the market and risk a slowdown in a key industry? Or will they reverse the recent trend and loosen policies?
“Currently the Chinese property market's at a crossroads. It's a game of who blinks first,” Dong Tao, chief China economist at Credit Suisse in Hong Kong, told the Sydney Morning Herald.
The government appears more focused on affordable housing than encouraging international investment.
“It's very unlikely that the government will relax its policy of curbing demand,” Zhang Huadong, a property analyst with Xiangcai Securities in Shanghai, told a reporter. “If - and I mean if --policy were relaxed, there would be another surge in property prices. It would be a disaster for the market.”
If nothing else, the dialogue emphasizes the power the Chinese government exerts over the property market. And government officials are offering few clues to their future plans.
“In about a quarter's time, the property market will probably reach a full correction and prices will fall, but it's hard to predict the extent of the price falls,” Minister of Land and Resources Xu Shaoshi announced earlier this month.
