Real estate mogul Ren Zhiqiang called on the industry to abandon resistance to the government's tightening policy and let prices fall in exchange for sales.

Ren Zhiqiang, president of Huayuan Group, made such comments at a forum held in Nanjing over the weekend, Yangtze Evening Post reported Sunday.

The number of cities where housing prices are dropping is shrinking, but that doesn't mean that the market has stabilized, Ren said. The oft-maligned mogul asked property developers to stop going against the government's intention, adding that "it's not realistic to raise the housing prices soon."

"The declining housing prices are what the government wants to see, " Ren said, pointing out that property prices have starting going south and will fall more sharply in the last two quarters when more new houses come on the market. Despite the traditional peak season in September and October, estimated sales will still be less than the first half of the year, according to Ren.

Since the mortgage tightening policy started in April, housing prices haven't dropped significantly, and some first-tier cities continue to see a rise.

Due to huge profits last year, large property developers are rolling in cash and are even speculating that property policies might loosen, given the sector's major contribution to GDP.

Consequently most property developers in first- and second-tier cities still refuse to compromise, even though the potential buyers are waiting to see a price drop.

The property developers, however, seem to have made the wrong bet this time. Vice Premier Li Keqiang emphasized twice in eight days recently that the country will firmly continue to fight against housing speculation.

After Qingdao, Shijiazhuang and Wuhan, the Beijing municipal government will also promulgate further tightening measures this year, prohibiting property developers from immediately pocketing down payments, the National Business Daily reported last week.

Under the new measures, the buyers will transfer their down payment to a supervised account instead of paying directly to the property developers. Property developers need to apply to the regulator to use the money.

Real estate developers might have to reduce their prices and expedite sales to generate cash, said Zhang Dawei, research director of Beijing Centaline.

Down-payments account for an important part of developer's funding, amounting to 935.6 billion yuan (US$137.77 billion) in the first seven months, up 30.3 percent year-on-year, according to the National Bureau of Statistics.

(Global Times August 23, 2010)