The reason? In my opinion, the Chinese are still getting used to capitalism and saw property as an investment and a relatively safe investment. As with shares, the majority of investors have never seen a falling market. Pressures to sell have not come anywhere near peaking (yet).
It will take longer but a much larger fall in likely. However, as always we must come back to the Chinese government. IF the government wants to support property prices it could probably do so if it throws enough money at the problem.
The FT reports on this topic today:
Chinese office market has all but dried up [FT]
Still, most pundits say the biggest unknown remains how far China and other Asian governments will go to revive the property market.
A month ago, Beijing announced that it would cut taxes, make it easier for property developers to obtain credit and reduce the lock-up period for home sales, during which owners are unable to sell without paying stiff taxes.
The measures come after repeated interest rate cuts and the launch of a broader Rmb4,000bn economic stimulus package.
Meanwhile, labour and raw material shortages are also disappearing. Ng Ooi Hooi, an executive overseeing the construction of Tianjin Eco-City, a new town that will be home to 350,000 residents, says that building costs there have dropped 40 per cent from a year ago.
“There will probably be adjustments to our project but nothing fundamental,” he says. “Costs are really down and hopefully the [market] situation will have turned around by the time we are finished.”