Under-construction apartments are seen from a building during sunset in the Shekou area of Shenzhen, Guangdong.
A Reuters poll shows that China's property downturn is expected to continue until the first half of 2022, with home prices and sales falling as tight credit policies and a looming property tax dampen demand.
The property sector, a key driver of growth in the world's second-largest economy, has slowed sharply in recent months, with sentiment shaken by tight regulations and a growing liquidity crisis that has engulfed some of the country's largest and most indebted developers.
The forecasts for home prices and property investment were gloomier than the last poll in August.
The average home price is estimated to fall 1.0% in the first half of 2022, according to 14 analysts and economists surveyed by Reuters from Nov. 26 to Dec. 1.
Home prices are expected to rise 2.6% for 2021, down from a forecast of 3.5% in the last poll and a gain of around 4.9% in 2020.
It's been a downward trend in home prices due to tight quotas on home loans, worries about a property tax and weak demand, said Chen Shen, an analyst from Huatai Securities.
In the first half of 2022, property sales by floor area are projected to drop 16%, compared to a 27.7% rise in the same period this year.
The expectation for supply-side property investment is gloomy, with a drop of 3.0% in the first six months of 2022, compared to a 15% rise in the first half of this year.
There is a possibility that policymakers could dial back tough restrictions on buyers and developers and even cut interest rates if economic growth falters too much.
Most China watchers expect authorities to stick to curbs for now, even as they fine-tune regulations, including a loosening of credit policies.
The cities will relax restrictions on purchases, sales, loans and curbs on lowering selling prices, according to Zhao Ke, an economist at China Merchants Securities.
Policymakers have made some tweaks to help genuine home buyers and some local authorities get a handle on the financial crunch at developers.
A notice was issued last week by Chengdu, in the south west of China, to ensure developers receive funds from presold properties and fresh loans.
Four of the 14 interviewees think a property tax will be introduced in some wealthy cities, such as Shanghai and Shenzhen, by the end of the year, and eight think it will be introduced in 2022.
How would a property tax affect home prices? Most people think it depends on the tax rate, but it is expected to rein in soaring home prices in the short term.
After the announcement of the cities that are implementing real estate tax testing, the price of homes may fall by volume, according to Huang Yu, vice president of the China Index Academy, a Beijing-based property research institute.
There could be an increase in supply and reduce speculative buying, which could cause downward pressures on home prices, said Huatai Securities's Chen.
Most agree that property will be more affordable over the next two and three years under President Xi Jinping's common prosperity campaign and government slogan houses are for living in, not for speculation.