China Property Prices May Fall 30% as Economic Growth Slows, Nikko Says

China’s property prices may drop as much as 30 percent and economic growth will slow below 8 percent following government measures to cool the real-estate market, according to Nikko Cordial Securities Inc.

Officials from China’s State Council and real-estate industry have estimated property prices will fall a minimum 20 percent, said Chiyuki Shiraiwa, an economist at the securities company in Tokyo, citing a survey she conducted this month.

“The Chinese government seems to expect that the nation will withstand a 30 percent drop in prices and that there will be a minimum macroeconomic impact,” Shiraiwa said yesterday at a forum in Tokyo.

Shiraiwa cited a stress test the China Banking Regulatory Commission conducted in June that forecast the bad-loan ratio at banks may climb to 1.41 percent from 1.04 percent if home prices decline by 30 percent.

China’s government has raised bank reserve ratios three times this year and introduced controls on lending for second and third homes in a bid to prevent a bubble forming in the property market. Prices in 70 cities dropped 0.1 percent in June from a month earlier, the statistics bureau reported July 12.

A slide in property prices will likely push down the nation’s economic growth in the three months ended Dec. 31, Shiraiwa said.

At the State Council “there’s even talk that growth will slide below 8 percent in the October-December period,” she said. The authorities believe the nation must seek to maintain growth of at least 8 percent and if this appears in danger they are likely to introduce more stimulus measures, she said.

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.