BEIJING, Dec. 24 -- Home prices in China's largest cities may reach their ceiling in the first quarter of 2014 and drop at the end of next year, according to a report released by the Chinese Academy of Social Sciences on Wednesday.
The green paper on China's housing sector said that the growth rate of home prices is expected to stabilize throughout next year after previous rounds of hikes.
The price of homes in large Chinese cities continued to rise from a year earlier in November, latest official statistics showed.
New home prices rose month on month in 66 of the 70 major cities monitored by the government last month, up from 65 in October, according to the National Bureau of Statistics (NBS).
Average home prices in these cities climbed 0.6 percent in November from the previous month, slowing from a 0.7-percent rise in October, indicating the growth rate is losing its steam.
The growth momentum has eased as the central and local governments' regulation policies on the housing sector paid off and the market expectation changed, according to Zhang Xu, a researcher of property brokerage firm HomeLink.
With these cooling signals in sight, the report forecast that home prices in first-tier cities may reach their peak in the first quarter next year, stabilize in the second and third quarters, and gradually decrease in the last quarter, said Ni Pengfei, director of the Urban and Property Research Center of the National Academy of Economic Strategy.
Dramatic price hikes this year have overshadowed homebuyers' payment ability. Meanwhile, a large portion of housing demand has been exhausted, and developers' previous land-buying means a large land supply next year, all contributing to the expected price growth stabilization, according to analysts.
As major cities such as Beijing, Shanghai and Guangzhou are still attracting many new residents, demand remains robust there and prices will likely remain high in the short term, the report said.
However, the situation in the third and fourth-tier cities, most of which are located in the country's central and western regions, will be completely different.
The property boom in past years has prompted developers to flood the market, while demand is sluggish as many are leaving, making these places “ghost cities” such as Erdos and Anshan City in north China.
The phenomenon is feared to exacerbate as growth momentum there is unlikely to continue and could even drop, the report said.
The report therefore called for different policy orientations for different markets, saying that previous clean-cut property-control policies did not take into consideration different situations.
Despite the government's firm stance on curbing runaway housing prices, ordinary people are still facing relentlessly rising prices, adding to the concern of a price bubble.
The report said that from historical and international experiences, the real estate bubble burst is closely related to economic recession. As price drop is only seen in a small number of bearish cities and most cities enjoy a rosy growth prospect, a property market meltdown is unlikely in China.
The report also called for measures that rely more on market forces and improve the supply side, rather than measures that depress demand.
The Chinese central authorities haven't introduced any nationwide measures since the new leadership took office in March, reflecting a desire to let market forces, rather than administrative actions, control the property market, analysts said.
Last week's central economic work conference, a key meeting setting the agenda for next year's economic work, stressed the need to increase affordable housing and land supply.
Last month, a key Communist Party of China meeting on the nation's reform plan vowed to push ahead with changes to property tax legislation, more liberal rural land rights and uniformed platforms for housing and credit information.
"These are very smart policies. They didn't say property regulation but many are meant to," said Li Yang, vice president of the Academy of Social Sciences.