Housing market faces price corrections, says think tank

China's housing market is not approaching a turning point, but price corrections will lead to declining home prices in the short term, a report released by the Chinese Academy of Social Sciences said on Monday.

China's urban housing demand is expected to experience a bigger downturn between 2020 and 2025, said the report.

"The likelihood of a house price collapse remains small because residents are currently embracing the idea of upgrading their living standard, rather than just having a house to live in," said the report.

China's relaxation of the one-child policy will benefit the property market in the long run, according to the report. However, the revised policy that allows couples to have a second child if one spouse is an only child is not producing an instant effect on housing.

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Ni Pengfei, a senior researcher on urbanization and property with the CASS, said the demand growth in China's real estate market will decelerate in the next 10 years.

Meanwhile, house prices will experience a period of adjustment as demand exceeding supply shifts to a structural reform that is generating a surplus of homes.

The residential sector will suffer a slowdown in investment, and the concentration within the sector will be improved as developers focus on branding, the report said.

Ni said it is possible for a collapse to occur in smaller cities in East China.

"It is a danger for second- and third-tier cities, which have undergone rocketing home prices and are faced with a large inventory," said Ni.

Among 70 major cities in China, 55 recorded month-on-month price declines for new homes in June, according to the National Bureau of Statistics.

The worst month-on-month performance was in Hangzhou, the capital of Zhejiang province, where prices fell 1.8 percent in June.

Compared with the same period last year, Wenzhou, Zhejiang province, saw the biggest price drop of 5.3 percent.

As the downward trend emerges in more cities, local governments are trying to boost the market by easing home purchase restrictions. Up to Tuesday, among the 49 cities that introduced property policies, 31 cities have lifted home purchase restrictions since Hohhot, capital of Inner Mongolia autonomous region, became the first.

On Monday, Shijiazhuang, the capital of Hebei province, canceled property purchase restrictions, followed by Wenzhou on Tuesday.