China’s average home prices will probably fall between 10 to 20 per cent in 2012, a pace modest enough to prevent a hard landing of the economy, with the biggest declines expected in major cities such as Beijing, a Reuters poll showed today.
The poll of 21 respondents, including economists and property market analysts, showed China will stick with purchase restrictions to regulate the real estate markets, but may tweak those measures if prices fall too precipitously.
10-20% is anything but a hard landing. And while it is true that Beijing knows full well that a poor housing market could quickly sour GDP growth for the entire country, that knowledge doesn't mean much. To say they have the tools to fabricate a gradual decline that doesn't crush construction activity and yet brings real estate markets closer to equilibrium is one thing (and an overstate itself). To actually orchestrate that particular market movement will require a combination of the right policies and great deal of luck. For this reason, it's most likely that they err to the high side - doing too much rather than doing too little and deploying the wrong policies, which reminds me of an old Chinese proverb:
Do not use a hatchet to remove a fly from your friend's forehead.
In the end, the world knows China must suffer a transformation from producer to consumer. Every first world country has. As such, the greater danger (beyond 2012) is that delaying the big adjustment will only make it worse. To put it mildly, Chinese officials and the PBoC have their work cut out for them.