January 9, 2012 / 10:01 AM / 6 years ago

China home prices to fall as supply grows - report

BEIJING, Jan 9 (Reuters) - Home prices in China are likely to fall moderately in the first half of 2012 before stabilising in the second half as Beijing maintains market tightening measures, according to a report released on Monday by REICO, a research institute sponsored by developer.

Average home prices nationwide have declined since October, and government leaders have repeatedly said they want to pull prices back to a “reasonable level”.

Rapid growth in construction of new homes from March to November of 2010 would translate into a surge in supply from the third quarter of 2011 through the first half of 2012, said the institute, set up by the China Real Estate Chamber of Commerce, a semi-government association, and a fund created by developers.

It said softening prices and the looser monetary policy would lead to easier and cheaper mortgage loans for first-home buyers and increase transactions, while slower expansion by developers would cool real estate investment this year to about 16 percent and economic growth to 8.3 percent.

Annual investment in the real estate sector rose 29.9 percent in the first 11 months of 2011, down from 31.1 in the first 10 months, official data showed. REICO forecast GDP growth of 9.0 percent for 2011.

“The cash strain facing some developers will increase mergers and acquisitions in the real estate sector in 2012 under the backdrop of continued government tightening measures,” the institute said in the report. (Reporting by Langi Chiang and Kevin Yao; Editing by Chris Lewis)

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