Prepare for pop of property bubble

Many analysts had previously concluded that there will be at least another 10 years of golden time. Qiu Baoxing, vice-minister of housing and urban-rural development, said on the sidelines of the annual sessions of the top legislature and top advisory body that China's housing sector is unlikely to encounter a big crisis in 10 years. It is believed by many that the housing market will still be China's fastest-growing sector before the end of its urbanization.

Compared with such a view, some are more wary, but they still hold an optimistic outlook on the housing markets of first-tier cities.

Property price surge 'could soon be over'

As residential home market cools, investment keeps on growing

However, the lackluster price increases in Beijing and other first-tier cities in recent months and their slackened sales mean that the prospect for China's housing market is not that optimistic.

The slowed price increases and the drastic drop in sales this year have taken place at a time when no explicit housing regulations are being formulated. The government even refrained from taking administrative measures after the housing market experienced an unreasonable price increase last year, to leave the settlement of the price issue to the market.

A series of factors, including a loose monetary policy, strong housing demand and supply insufficiency, high-speed economic development, local governments' excessive dependence of their fiscal revenues on land sales, as well as the influx of international capital betting on the yuan's appreciation, have altogether bolstered the soaring of domestic home prices over the past decades.

However, all these engines have started losing power since the start of this year. The confirmed phasing out of the quantitative easing policy by the US Federal Reserve will inevitably accelerate the outflow of international capital from China.

The combined influence of these factors has increased the possibility of a decline in house prices this year. The fast price increases following a series of stimulus measures adopted after the 2008 global financial crisis have tightly bound China's economy to the housing market.

The author is director of the Private Economy Research Center under Renmin University of China. The views do not necessarily reflect those of China Daily.