Govt constraints succeed in curtailing surging home prices, though more restrictions believed on the way

By Huang Ge Source:Global Times Published: 2016/12/22 17:43:39

Heat ebbs from property market

China's real estate market grew overheated in 2016 as home prices in first-tier and some second-tier cities surged several times earlier this year. In response, local governments in about 20 cities rolled out home purchasing restrictions in October. Although the market has since cooled, experts said it remains under pressure and faces some challenges in the coming year. The Chinese government has showed its determination to stabilize the real estate market and crack down on speculative buying.

Residential buildings in Shijingshan district, Beijing, in October Photo: CFP

Residential buildings in Shijingshan district, Beijing, in October Photo: CFP

Molly Zhou did not expect she would have to file a lawsuit to get the Beijing apartment she wanted at the price she had agreed to.

Yet, that's what she did in November after the homeowner backed out of the sale due to the precipitous rise in home prices in the capital city, even though the pair had already signed a sales contract.

Zhou's quest for an apartment goes back to February, when Beijing home prices were surging. "I told myself I should not wait any longer. Now is the time," the 20-something white-collar worker told the Global Times on December 17.

On May 30, Zhou settled on a 70-square-meter secondhand single-bedroom apartment outside East Fifth Ring Road in Chaoyang district, she said.

By then, the market had cooled, so Zhou, a native of Xiaogan, Central China's Hubei Province, signed a sales contract and paid her down payment at the end of June.

Closing a real estate deal takes time, though. Zhou initially expected to transfer the deed in September, but then prices started to surge again in July and she began to worry.

In September, the value of the apartment she wanted had been reassessed.

It was worth 800,000 yuan ($115,000) more than what she had agreed to pay for it. The homeowner balked.

"The apartment owner regretted selling his apartment at 'such a cheap price' and tried to break our contract," she sighed.

So she sued. But her case has yet to make it to court because there are so many other similar cases ahead of hers.

Zhou's story illustrates just how fast residential real estate prices have risen in 2016 in Beijing, as well other first-tier cities, including Shanghai, Guangzhou and Shenzhen, both in South China's Guangdong Province.

In June, Shenzhen's housing prices jumped 47.4 percent year-on-year, according to data from the National Bureau of Statistics (NBS). In the second half, the frenzy spread to second-tier cities such as Xiamen, East China's Fujian Province, Hefei, East China's Anhui Province and Suzhou, East China's Jiangsu Province.

Clamping down

"Despite the soaring housing prices, there is no shortage of buyers," said a real estate agent in Chaoyang district, who only gave her surname Liu.

Liu, who works for Lianjia, one of the largest real estate agencies in China, said in an interview in September that prices of some secondhand apartments had jumped by 200,000 yuan in a single week, yet many residents rush into the market.

On December 18, Liu said the city's housing market had since calmed down. "The market began to cool in October after the Beijing government announced home-buying restrictions on September 30," she told the Global Times.

On October 1, local governments in more than 20 cities rolled out restrictions, including higher down payment requirements, to cool their red-hot housing markets.

Beijing, Shanghai, Shenzhen, Suzhou and Nanjing, East China's Jiangsu Province, were among them.

"In the peak month like August, an agent in our office could close one deal for a secondhand apartment and take on three to five new clients in a week," Liu said. "But in October, I did not have a single client for one or two weeks because the overheated market is cooling."

Among four first-tier cities and 11 second-tier cities monitored by the NBS, nine reported that new home prices fell on a monthly basis in the second half of November, the NBS said in a statement on Monday. The declines ranged from 0.1 to 0.9 percentage points.

In late November, local governments unveiled home-buying restrictions, showing their determination to further tighten the market and crack down on speculative buying.

The Shanghai Housing and Urban-Rural Development Commission announced on November 28 that it had raised the minimum down payment requirement for the city's first-time homebuyers to 35 percent from 30 percent. In addition, residents who bought second homes for residential or investment purposes had to put down 50 percent or 70 percent of the purchase price, respectively.

The government has been ramping up efforts to regulate the domestic housing market, and the moves will continue into 2017, said Hui Jianqiang, research director of the real estate information provider Beijing Zhongfangyanxie Technology Service.

Authorities could roll out more restrictions in first or second-tier cities if home prices there soar again, and the local governments will assess the property markets of third- or fourth-tier cities on a more case-by-case basis, Hui said.

"China's real estate market is entering a period of adjustment, and authorities will get it under control in the coming years," he told the Global Times on Thursday.

Cementing stability

The Chinese government is committed to stabilizing the housing market instead of cracking down on it, experts said.

During its annual Central Economic Work Conference, which ran from December 14 to 16, the central government pointed out that "homes are for living, not for speculation," the Xinhua News Agency reported on December 16.

The central government plans to use all the tools at its disposal to prevent a property bubble, including finance, taxation, investment and legislation, to create fundamental systems and a long-term mechanism that conform to both national circumstances and market rules, according to the Xinhua report.

Also, credit policies are expected to support legal independent purchases and to strictly prevent the flow of credit into speculative buying.

The meeting shows that a long-term mechanism will play a key role in the development of domestic housing market and stricter financial controls will be introduced into the housing market in 2017, said Yan Yuejin, research director of the E-house China R&D Institute.

Authorities will also continue to tighten controls on property developers and real estate agents in the coming year in a bid to cement market stability, Yan told the Global Times on December 18.

In 2017, China's housing market will also be affected by some external factors. The US Federal Reserve on December 14 raised its benchmark interest rate by 25 basis points, which Hui said would bring domestic real estate market in first-tier cities under pressure because some owners are likely to sell their properties to purchase assets denominated in US dollars, leading to capital outflows.

Hui also said that China will continue to be committed to reducing housing inventories, especially in third-tier and fourth-tier cities, though it will likely take a while.

"Promoting urbanization is one way that could be helpful because the demand for housing in some third- and fourth-tier cities could rise after more rural residents move there," he said.


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