(Yicai Global) Oct. 14 -- China’s real estate market remains generally stable and resilient, and there is no need for a general bailout, economists and real estate experts told Yicai Global, at a time when some leading developers are facing cash shortages and the market has cooled.

The experts interviewed by Yicai Global generally believe that regulation of the property market will probably not tighten further, but it is not likely to be loosened either.

The government of Harbin, a city in northeastern China, issued a policy last weekend to support the local real estate market. It is unlikely that other cities will follow through with similar “rescue” policies, said Kuang Weida, director of the Center for Urban and Real Estate Research at Renmin University of China.

“The industry is in a period of survival of the fittest and does not require excessive administrative intervention,” Kuang said.

“From the supply side, the sustainable development of real estate companies requires risk management and control. From the demand side, most cities have not reached the moment of crisis when the property market collapses and needs a bailout,” Kuang said.

Most of the cities that have introduced similar support policies are facing problems such as population outflows, shrinking industries and slow inventory digestion cycles, according to Chen Sheng, executive director of the China Real Estate Data Academy. For these cities, even if policy is loosened slightly, the boost to the local property market would still be limited.

No Systemic Risk Yet

Though the current market has entered a cyclical low, the fundamentals have not changed and the overcooling and overheating markets in certain areas are still microscopically adjustable, Kuang said, adding that there are not yet systemic risks. 

Jia Kang, head of the China Academy of New Supply-side Economics, agreed with this analysis, adding that the current risks for developers are generally controllable, and problems with some prominent firms do not mean that China’s realty market has no further room for development.

“There is no need to be overly pessimistic in this regard, or it will affect the judgment that the property and land markets still have long-term growth potential,” Jia said, referring to the generally cool interest in recent land auctions across China and the concern that this may affect local governments’ fiscal revenue.

In the long run, with the rapid advancement of China's urbanization, more land will continue to enter the market to meet the demand from actual economic and social development, Jia said.

Land Auction Failures

But other experts told Yicai Global they were concerned about the phenomenon of unsold land in the second rounds of centralized land auctions this year. To avoid unsuccessful auctions, local governments should adjust the corresponding policy details and auction parameters before the third round at the end of this year, Chen advised.

The outcome of auctions is related to the decision-making of real estate companies, the various restrictions set by the government on land use and the amount of land purchased by developers with high debt ratios, according to Chen. Lack of support from the financial market is also a factor, Chen added. Local governments should fine-tune these policy details based on market conditions before the next land auction.

The property market regulation and control policies should not only be “city-specific,” but also “district-specific” within the same city, so as to cope with the increasing differentiation of industry trends in different cities and regions and to achieve refined market management, Liu Lu, professor of economics at Southwest University of Finance and Economics, told Yicai Global.

Falling Market

The cooling of this year’s property market began earlier in the summer due to increased regulation and control policies, and the market is expected to continue downward in the fall, Ni Pengfei, director of the Center for City and Competitiveness of the Chinese Academy of Social Sciences, told Yicai Global.

But the downward trend is expected to slow by this winter or early spring next year, Ni said.

China’s National Real Estate Climate Index fell for six consecutive months from March this year, with the index dropping to the lowest point this year of 100.85 in August, according to statistics released by the National Bureau of Statistics in mid-September.

Editors: Tang Shihua, Tom Litting