* Home prices seen at +4.3 pct y/y in 2014 vs +5 pct in previous poll
* Most respondents see price corrections in some small cities
* Corrections unlikely in big cities
* More small developers likely to see defaults
By Xiaoyi Shao and Jonathan Standing
BEIJING, April 1 (Reuters) - China’s home price inflation is likely to slow in 2014 compared with the previous year as liquidity conditions tighten, a Reuters poll showed, though some small cities plagued with oversupply might see a price correction.
A Reuters poll of economists and property market analysts, conducted between March 21 and 31, predicted a 4.3 percent rise in China’s house prices in 2014 and a 3.0 percent increase in 2015.
The forecast rise for 2014 was below a previous estimate in a poll four months ago, which had projected an increase of 5.0 percent in 2014 after a 9.9 percent gain in 2013, pointing to a faster rate of cooling in the market.
China’s red-hot property market has lost steam since late 2013 as local governments tightened controls on speculative buying, and as banks made it harder for home buyers and small developers to get loans.
“Home prices will not surge as much as they did last year because the government will not continue its loose monetary policy in 2014,” said Sun Binyi, an analyst at real estate services firm E-House China in Shanghai.
Anecdotal evidence has suggested liquidity in the economy has tightened this year, especially to the property industry, as banks are turning more cautious about granting new loans.
Official figures showed China’s home price rises slowed to a six-month low in February as some developers started to cut prices. That trend has been welcomed by the government, which has spent over four years trying to tame record home prices on concerns they were stoking an asset bubble.
Official curbs to cool prices had included tightening mortgage lending, releasing more state land for development and pledges to build affordable homes. The government had stopped short of severe measures because of the importance of the property sector to overall growth.
Xu Shanda, former deputy chairman of the State Taxation Administration, said the government has now shifted its priority to increasing the supply of cheap homes to help poor citizens.
“The premier didn’t mention property controls in his work report and the housing ministry is no longer checking whether local governments have met their own targets for home price rise caps,” Xu was quoted by the official Securities Times newspaper as saying on Monday.
He was referring to Premier Li Keqiang’s report in early March to China’s annual parliament session, in which the government states its policy stance.
For a factbox on the poll questions and results, see. A total of 16 market participants were polled, but not all answered all questions.
The poll showed 13 of 16 respondents thought the chance of a price correction in large cities was slim this year while 14 of 15 respondents expected price corrections would happen in some small cities.
“Weakening demand and rebounding inventory levels in lower tier cities may result in some bursting of bubbles there in 2014-15,” said Shen Lan, an economist at Standard Chartered in Beijing.
“We expect the growth pace will continue to moderate in T1 cities on cautious sentiment of buyers and local governments’ efforts to rein in price gains,” said Shen, adding that huge demand will continue to support price growth in top cities such as Beijing, Shanghai, Guangzhou and Shenzhen.
China’s property market is increasingly diverging between big and small cities. In large cities, prices have spiked on strong demand and tight supply, while smaller cities are seeing slower price growth as demand softens.
The poll showed most respondents thought house prices were overvalued, with the median forecast 7 on a scale of 1 to 10, where 1 is extremely undervalued and 10 extremely overvalued.
In the poll, 12 of 16 respondents thought default cases were likely to spread to more small-sized developers after a recent default of a small developer in Zhejiang.
“We should pay high attention to small developers in medium and small cities with difficulties in getting loans and relying on complex resources to fund their investment,” Qin Hong, head of the policy research institute under the Housing Ministry, told a forum last week. (Additional reporting by Jenny Su; Editing by Jacqueline Wong)