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The Chinese commercial and residential real estate markets continue to perform well; however, as government price controls take effect some experts predict some developers may be forced to slash prices to be able to offer competitive property deals. Knight Frank reports that continued positive growth in China’s economy will help offset distress caused by financial problems in the wider global market, and that prices on the whole will continue to increase. Retail properties are expected to outperform office and residential properties as the country continues to enjoy expansion. For more on this continue reading the following article from Property Wire.

Sluggish sales and high inventory levels will further increase funding pressure on developers in China and could force them to cut prices in order to stimulate sales, it is claimed.

‘Now that residential prices have started to appear under control, we believe the government is unlikely to launch further tightening policies. However, current policies are not expected to be relaxed in 2012,’ says the latest Greater China Property Market from Knight Frank.

‘We expect prices will only adjust slightly this year as local governments fine tune their policies based on each city’s situation. Although the transaction volumes of luxury flats will decline significantly, rents and prices in Shanghai and Beijing will increase slightly, while those in Guangzhou will remain stable,’ it adds.

Despite uncertainties in the global economy, the positive outlook about China’s economic growth will lift demand for quality commercial properties on the Mainland, Knight Frank predicts.

A rapid expansion of international and local corporations and a shortage of Grade-A offices and prime retail properties means that rents and prices for commercial properties in first tier cities will continue their upward trend in 2012.  Indeed, the report predicts that rents and prices of Grade-A offices could outperform and grow 15% and 10% respectively in Shanghai, followed by Guangzhou and Beijing in 2012.

In Hong Kong, the property market trend will hinge on local economic performance which is affected by the sovereign debt crisis in the eurozone European and the United States, the report says.

Office demand is expected to remain weak amid slow business expansion and limited new office set-ups. ‘We forecast that the current downtrend in Central Grade-A office rents will continue in 2012. In the residential market, mass home prices are likely to drop 10 to 15% in 2012,’ the report reveals.

‘However, with continued tight supply, luxury residential properties are likely to perform better, with price declines limited to 10% in 2012,’ it adds.

Knight Frank believes that retail properties will continue to outperform other property markets in 2012 as global retailers are set to continue expanding into major shopping centres in both core and non-core areas.
‘Retail rents are expected to continue their uptrend in 2012, albeit at a slower pace amid the risks of a worsening global economy,’ it says.

Meanwhile, China Vanke, the country's largest developer by revenue, says year on year sales fell 30% in December, a fifth consecutive month of decline, as government measures to calm housing inflation take effect.

This article was republished with permission from Property Wire.