China's massive housing market is undergoing adjustment -- but experts believe a healthy market may emerge.

"If the market doesn't drop as much as people expect after the Olympic Games, prices will rally again, and will probably even rise," said Ben Christensen, head of research for Jones Lang LaSalle Beijing. The current wait-and-see sentiment in the market does not mean housing demand is evaporating, he added.

Yet some market watchers believe Beijing's tightening mortgage policy has put a sudden brake on the overheating housing market, especially in Shenzhen, Shanghai and Beijing, where prices had mainly been driven by speculation. Economic uncertainties as a result of the global slowdown and the tight monetary policy at home have also dampened the real estate market.

Chris Brooke, president and CEO of CB Richard Ellis, said China is not likely to suffer a credit debacle like the US, despite the ongoing adjustments in the country's property market.

"Some big corrections occurred only in a few cities that experienced crazy property price growth last year but don't have enough demand to support the market," said Brooke, stressing the market adjustment should be seen on a city-by-city and project-by-project basis rather than an overall collapse. "Besides, property demand in China is also much stronger than that of the US," he added.

Sale of residential houses in Shenzhen is forecast to continue plunging this year to the level of 10 years ago, as home buyers and investors have adopted a wait-and-see attitude.

Shenzhen's land and housing authorities released a report on the city's housing market that shows the average housing prices in May 2008 fell 36 percent to 11,015 yuan per square meter from the peak in October 2007 at 17,350 yuan per square meter.

"Prices are expected to drop another 10 percent as some struggling small-and- medium-sized real estate developers and housing speculators are selling properties for cheap to maintain cash flow," said Song Ding, a senior real estate analyst with China Development Institute.

(China Daily July 23, 2008)