THE country’s housing market is expected to slow this year with sales forecast to drop, as China steps up efforts to scrutinize banks and provincial governments to keep a lid on lending and prices, a recent poll showed.

Average residential property prices are estimated to rise 6 percent in 2019 from a year earlier, according to the latest poll of 15 property analysts and economists. The forecast was slightly higher than the 5 percent projected in the previous poll conducted in March, but is significantly slower than the 9.7 percent gain seen in 2018 and in July in year-on-year terms.

“Housing measures in some cities will be tightened to avoid liquidity to divert into investments in properties. This will continue into the first half in 2020,” said Iris Pang, Hong Kong-based China economist at ING Wholesale Banking.

“Unless and until the trade conflict stops escalating then China’s central bank won’t need to pump liquidity into the financial system, and therefore there will be less worry that money will fuel property prices.”

Price growth is projected to further slow to 3 percent in the first half of 2020, the poll showed.

Lan Shen, an economist with Standard Chartered Bank in Beijing, also noted that Chinese developers may opt to cut prices as they face liquidity pressure and slowing sales.

The central bank said Sunday China will set lower limits on mortgage rates, in an apparent bid to curb housing risks following its reform to switch to a market-based reference rate.

But few analysts believe prices will fall sharply. A lack of investment options, strong underlying demand for housing and the relaxation of home purchase restrictions in some cities will all likely support prices, although sales are still expected to contract by 2 percent in 2019.

“In regional markets where there have been signs of overheating since last year, there is a large downside risk,” said Yuan Chengjian, an analyst with Beijing-based property consultancy Zhugezhaofang.

“But the probability of a sharp downturn — which means transaction volume falls more than 20 percent — is not high. There is no such risk on the national market as a whole.”

The property sector held up as one of the few bright spots in the slowing economy, although easing momentum in some markets took immediate pressure off regulators to unleash major new curbs to deter speculation.

Real estate investment — which usually lags sales trends by a few months — will likely remain elevated as land sales hit a record in the first half this year and construction activities picked up.

Property investment is now expected to rise 8 percent for the year, from 7 percent in the last poll, even as some developers have shown more caution in the market as the government clamped down on domestic and onshore financing for the sector.

Asked to rate the affordability of Chinese housing on a scale, with one being the cheapest and 10 the most expensive, analysts’ median answer was seven, unchanged from the last poll. (SD-Agencies)