Property prices set to decline, S&P says

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China's real estate developers are likely to struggle over the next 12 months, with property prices in larger cities decreasing by as much as 10 percent.

That's according to a report released by Standard & Poor's on Monday.

Recent government regulations, aimed at curbing speculation and reining in soaring prices, may result in reduced demand, said Fu Bei, an analyst at S&P.

At the same time, a slew of new residential properties are now ready to be sold, thus increasing supply and prompting a decline in average house prices over the short term.

However, analysts say that developers may be better equipped to weather the storm than they were in 2008.

S&P says many real estate companies have boosted their levels of liquid capital, and have already reached their target annual revenue for this year.

China Vanke Co, China's largest listed developer, achieved peak sales of 14.21 billion yuan ($2.13 billion) in September, a year-on-year increase of 160.1 percent.

The same month saw sales revenue at Shimao Group rise to 3.52 billion yuan, a year-on-year growth of 30.3 percent.

Guangzhou-based R&F Properties reported 3.63 billion yuan - an increase of 19 percent - and Beijing Capital Land signed contracts to the value of 1.4 billion yuan, a rise of 32 percent year-on-year.

Total sales revenues in the first three quarters at companies such as Vanke, Soho China and Shanghai Forte, have exceeded the annual numbers for 2009.

The financial situation for property developers has been improving, said Nie Meisheng, head of China Real Estate Chamber of Commerce, on Monday.

The market hit a low point in May and June, following a government regulation increasing down payment levels and interest rates on second-home mortgages in April.

However, trading volumes and revenues rebounded in August, said Nie, which suggests that property prices may not decline rapidly during the fourth quarter this year.

Nevertheless, the increase in down payment levels, allied to plans to expand property tax trials nationwide, means that it's less likely that prices will rebound in the short term.

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