UBS: There will be no nationwide plunge in house prices

Economic observation Network reporter Zhang Yanlong recently, UBS issued a China real estate ten-question report. In the report, UBS predicts that real estate sales, especially in big cities, will weaken in the coming months.　　As buyers and developers take a wait-and-see attitude, price rises will slow, new and under construction projects will be postponed, but there will not be a nationwide housing slump and housing prices in big cities will not soon collapse.　　The real plunge will not cause further blows to local government debt in the report, UBS also believes that if their judgment is wrong, a sizable fall in house prices in the coming quarters (such as 20% per cent) will not be a further blow to the local government debt crisis and banks will not suffer a wave of defaults. UBS said the proportion of new home purchases and residential sales in 2009 significantly increased. But the average for the past few years is about 30%.　　In fact, UBS reckons that the average loan value for home loans is less than 50%, although the proportion of new home purchases in the past year, which accounts for about 1/3 per cent of the loan balances issued, is higher, about 70% to 80%. Similarly, the local government's reliance on real estate-related taxes and land-transfer payments averages above 20%, not as high as many people think. Moreover, if local governments ' real estate and land-related income declines, they will have to reduce spending on real estate-related projects (relocation, construction of CBD, road construction), so that they do not slip into a liquidity or debt crisis.　　Moreover, the central government has asked local governments to increase the supply of land for public housing construction, which will also help stabilise their revenues in the near term. Overall construction activity will grow 10% to 15% as VW and low-end housing construction will offset the decline in high-end residential construction in big cities, UBS expects overall construction activity to increase by 10% to 15% this year. However, given the current high level of construction activity, UBS expects construction activity to continue to slow down at some point in the second half of 2010.　　Demand for imports of building materials and commodities will also slow in the second half of the year. 2010gdp10% 's forecast for 2010 GDP growth was 10%, with growth in the second half falling from around 12% in the 1 quarter to 9% per cent, while their forecast for 2011 GDP growth was 8.7%. "These figures have taken into account that the downward risk of a slowdown in fixed asset investment growth in infrastructure and housing construction comes mainly from weaker export demand and the impact of real estate regulation policies that could occur at the end of 2010 and 2011," said UBS.