Chinese consultant sees more price cuts in housing market

BEIJING, July 2 Wed Jul 2, 2014 4:07am EDT

BEIJING, July 2 (Reuters) - Chinese property consultant CRIC is predicting that Chinese developers will likely to cut the prices of about 1,100 new housing projects in 21 big cities to lift flagging sales, underlining the pressures in China's cooling real estate market.

The housing market is a major driver of investment in China, with home-building said to support about 40 industries employing millions of workers.

CRIC, which provides investment recommendations to home buyers on a four-point scale that ranges from 'buy as soon as possible' to 'wait and see', has downgraded its ratings for 27 percent of the 4,038 new housing projects that it tracks.

The developers of the 1,107 new housing projects are likely to cut prices to boost slackening sales, CRIC said in a statement. CRIC is a unit of real estate services firm E-House China.

"For these projects that have been downgraded, we think their prices do not reflect the current market conditions," said Ding Zuyu, co-president of E-House.

China's property market has lost momentum since late 2013, with the latest data showing home prices fell 0.2 percent in May from April.

That slippage has led other analysts to forecast a further drop in China's new home prices in the third quarter as developers come to accept deeper price cuts and adopt more aggressive advertising and other strategies to meet 2014 sales targets.

So far developers have resisted big price reductions.

CRIC's data showed it upgraded its investment rating for only 3 percent of home projects, while its call on the remaining 69 percent of developments remained unchanged.

This is the first time CIRC is grading the investment appeal of real estate projects. Its four recommendation ratings are "buy as soon as possible", "buy", "buy with caution" and "wait and see".

The property consultant did not say to what category the 21 percent of properties that were downgraded had been assigned. (Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Eric Meijer)

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