By Tejaswi Chunduri: China's luxury property market faces a large oversupply, with significant unsold inventory in the market, according to John R Carter, Managing Editor, Asia & Managing Director, China at Market News International (MNI).
Speaking to PropertyGuru, he noted that the "government is trying to limit speculation which is highly rampant in the luxury market".
As a result, "domestic demand tapered off due to stricter regulations which have led to wealthy Chinese buyers looking for alternative investment opportunities overseas".
His comments come after the country's top advisory body urged the government to relax controls on the property market to ensure the economy continues growing.
This comes amid signs that property prices in China are hitting near bottom as Beijing eases its monetary policy while banks and local governments find ways around the restrictions.
However, Premier Wen Jiabao noted that Beijing will maintain its tight rein on the housing market to keep prices at affordable levels for ordinary Chinese. He also called for other measures to support the country's declining growth.
"I don't think the proposal on relaxing restrictions on home purchases will be accepted by the central government since it is in contrast to Beijing's tightening stance," said Li Wei, an economist from Standard Charted Bank in Shanghai.
Earlier reports revealed that the Chinese People Political Consultative Conference (CPPCC), an advisory body to the Parliament, had advised the central government to loosen purchase restrictions on luxury homes in first-tier cities like Shanghai, Beijing, Shenzhen and Guangzhou.
Meanwhile, Wei Yao, an analyst at Societe Generale, feels that while the housing sector is correcting itself and prices are declining at a moderate pace, the market has not hit bottom yet.
Yao said the strong balance sheets of Chinese households are supporting property prices since few owners are rushing to sell their homes, in return pressuring property prices in the primary market. Related Stories: San Francisco gaining ground as property hotspot
Why buy an island when you can buy an Atoll
Canada the new frontier for Singapore property investors
More from PropertyGuru:
San Francisco gaining ground as property hotspot
Why buy an island when you can buy an Atoll
Canada the new frontier for Singapore property investors
Majority of China's cities see home prices decline