Property market could take year to recover

China's property market could take as long as a year to recover, according to a former central bank adviser, who is urging Beijing to halt the spread of defaults by encouraging lending to developers.

Sales in China's largest cities could return to growth in the next four to six months but in smaller cities "it will take anything to between six months and one year for a good recovery," Professor Li Daokui, a former member of the People's Bank of China monetary policy committee, said in an interview.

Li proposed that Beijing create a mechanism to increase bank lending to property developers in order to reduce financial contagion risks.

About 100 billion yuan (HK$107 billion) will be needed to cushion developers through the current downturn, he said.

Li said it was possible the PBOC will cut interest rates once more before the end of 2023 but he does not expect "numerous or major cuts," partly because banks' profit margins are relatively low.

But he expects more detailed plans for the resolution of local government debt to be released soon, which is "much more important than cutting the interest rate."

However, Grow Investment chief economist Hong Hao believes it might take several years to even a decade to fix China's property sector as too many houses have been built.

In other news, China Evergrande (3333) shares dropped 7 percent yesterday after a unit of the embattled property developer missed the repayment of a 4 billion yuan onshore bond.