BEIJING - Housing prices are unlikely to drop this year despite tightening measures adopted by the government to cool the property market, a top think tank and senior economists said on Wednesday.
The annual report on the state of the real estate industry released by the Chinese Academy of Social Sciences warned that rocketing housing prices have become the biggest obstacle to the healthy development of the sector.
Niu Fengrui, former director of the research center for urban development and environment at the Chinese Academy of Social Sciences, said the government's tightening policy has led to a stagnation in housing prices.
Even in the long term, prices are unlikely to "experience a big fall," he said.
Some insiders earlier estimated that prices in Beijing may slump by as much as 30 percent by the end of this year after a series of moves by the central government to curb speculation and soaring prices.
Measures to cool the market include a ban on loans for third-home purchases, and raising mortgage rates and down-payment requirements for second-home purchases.
The central bank has also raised banks' reserve requirements, mopping up liquidity.
Property prices in 70 major cities jumped a record 11.7 percent in March, fueling concern that lending growth and inflows of capital from abroad are creating asset bubbles.
"Housing prices are too high, and the public will lose confidence in the government if rocketing prices keep shattering the common people's dream of owning their own apartments," Wang said. Housing prices are not only an economic issue but also political, he added.
"There's uncertainty about housing prices due to the changing economic situation this year," Li Jingguo, director of the research center for urban development and environment affiliated to the Chinese Academy of Social Sciences, said on Wednesday.
"Only a credit crunch will cause prices to drop in the second half of this year," he said.
But the policy environment is good, and the central bank earlier said it would maintain a moderately easy monetary policy this year, he added.
Central bank statistics show that new yuan loans to the real estate sector reached 845.7 billion yuan ($124 billion) in the first quarter, with outstanding loans rising 44.3 percent year on year. It was 6.2 percentage points higher than the end of last year. New loans for individual home purchases increased 53.4 percent year-on-year by the end of March, 10.3 percentage points higher than that at the end of last year.
Hong Kong-based economist Paul Cavey has said current policies toward property can't be sustained.
Tightening measures could be reversed in the fourth quarter, when the government has evidence that the market has cooled, Cavey was quoted as saying by Bloomberg.
"A big slowdown of property seems inconsistent to us with 8 percent growth, and so we would expect policy to reverse," Cavey said.
"If we do see a pretty serious correction in the property market, banks' balance sheets will likely be severely impacted and this could at some point, necessitate bailouts," Charlene Chu, a senior director at Fitch's financial institutions ratings team in Beijing, said on a conference call.
"The problem is there is a very high indirect exposure to the property market, mainly through corporates who have taken out loans and used that money for property investments or developments of their own," Chu said.
Macquarie Securities Ltd forecast on Wednesday that the government is likely to reverse policies cracking down on the property market because they will put the nation's 8 percent economic growth target for this year at risk.
The economy expanded 11.9 percent in the first quarter from a year earlier, the fastest clip in almost three years.
Bloomberg contributed to this story.