SHANGHAI: China will probably ease property curbs as early as the middle of the year to prevent a collapse of the housing market as the measures may boost supply to the highest in a decade, according toUBS AG.
“The gap between supply and demand will reach the peak, and the supply will be 1.5 times or even 1.6 times demand, and it will be a disaster for developers,” Chen Li, head of China equity strategy at UBS, said in a Bloomberg Television interview.
“Their cash flow will be exhausted to zero by the end of this year if they cannot get any financing. No one can afford that.”
China’s home prices fell for a fourth month in December after the government reiterated plans to maintain curbs that include higher downpayment and mortgage requirements, according to SouFun Holdings Ltd.
Housing values dropped in 60 out of 100 cities tracked by the nation’s biggest real-estate website owner, including the 10 largest cities such as Shanghai and Beijing.
The government said last month at an annual economic planning meeting that it won’t back away from real-estate industry curbs this year that are damping home sales and pulling down prices.
The nation’s financial centre of Shanghai and some other Chinese cities have also said they would continue to impose the home purchase restrictions this year.
“If you assume the property policy keeps stable in the coming year, that means by the end of the year the inventory of property will reach a new peak, around 10 years or even 20 years,” Chen said.
The government has said it would continue to increase the supply of social housing.
It plans to start the construction of seven million homes this year, compared with 10 million in 2011. The completion would at least keep pace with last year’s five million units, People’s Daily reported earlier this year.
A gauge tracking property shares on the Shanghai stock exchange climbed 0.9% compared with the 0.5% gain in the benchmark measure. – Bloomberg
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