The average house price in Beijing will plummet by as much as 20 percent as buyers snap up cut-price homes, according to the Beijing Academy of Social Sciences.
The average cost could even reach as low as 8,000 yuan ($1,170) per square meter in the coming months, it said in its Beijing Economic Development Report this week.
The stagnant housing market during the financial crisis and the influx of cheap price-limited condos are the main reasons for the drop, Tang Yong, assistant researcher and one of the authors of the report, said.
Price-limited condos, which have been backed by the government, are available only to families whose annual income is below 88,000 yuan and whose total assets are worth no more than 570,000 yuan.
Projects covering an area of 2 million sq m will be completed this year, with work set to start on another 8.5 million sq m, municipal government documents show.
"The government supported a few such projects late last year. It is the peak time for contracts to be signed in the next couple of months, which should add a touch of vitality to the housing market in Beijing," Tang said.
The properties have proved so popular, Zhao Bing, a salesman with Jinding Yangguan, a real estate developer specializing in price-limited condos, said his company had almost sold all 3,900 flats in Shijingshan district.
"We are still receiving enquires," he added.
"I am looking to buy a flat after Spring Festival and the price-limited condo will be a really attractive option," a teacher surnamed Liu in an elementary school in Fengtai district said.
"But I also have concerns the general housing market will see a further fall so that the price of commercial residence will be lower than price-limited condos favored by the government."
According to Tang, however, the general housing market will not suffer a significant drop this year due to the central government's adjusting policies.
"On the contrary, prices may bounce back a little in late 2009 when the economy gains back power," he said.