After mayor’s resignation, surge in home prices unlikely in Chongqing

By Huang Ge Source:Global Times Published: 2017/1/4 19:48:39

Reined-in real estate

One week has passed since Chongqing Mayor Huang Qifan resigned, yet domestic media is already abuzz with speculation about whether housing prices will soon surge in the southwestern municipality. The short answer is: probably not. But the speculation underscores the success that Huang had at keeping real estate prices under control during his 15-year tenure in the city. Experts said a price surge is unlikely in the short run because of the policies Huang has implemented, as well as the central government's commitment to keep property prices in check nationwide.

A residential housing construction site in Southwest China's Chongqing in October 2016 Photo: CFP

A residential housing construction site in Southwest China's Chongqing in October 2016 Photo: CFP

It might seem unusual that the first question people are asking after Chongqing Mayor Huang Qifan's resignation on Friday is whether housing prices will surge in the southwestern municipality.

Such was Huang's hold on the city's real estate market that his departure immediately sparked speculation about property prices.

Huang, who served as a vice mayor in 2001 and took over as the mayor of Southwest China's Chongqing in 2010, implemented a series of measures to rein in the local real estate market at a time when property prices were surging in many first- and second-tier cities.

Chongqing's housing prices grew a mere 12 percent in over the last five years, the 21st Century Business Herald reported on Friday, citing official data.

And it wasn't as if the local economy was struggling at that time. From 2013 to 2015, Chongqing led the country in economic growth. In 2015, the city's economy expanded by 11 percent year-on-year, according to data from the National Bureau of Statistics (NBS).

In the first 11 months of 2016, new home prices in Chongqing rose 6.5 percent year-on-year, data from the NBS showed.

Yet the average home price in Chongqing stands at 8,000 yuan ($1,151) per square meter, lower than many second-tier cities, said Yan Yuejin, research director of the E-house China R&D Institute.

In Xiamen, East China's Fujian Province, the average home price jumped to more than 20,000 yuan per square meter at the end of 2016.

In Nanjing, capital of East China's Jiangsu Province, the average price is around 18,000 yuan per square meter.

Some might see Chongqing's relatively low residential real estate prices as having a lot of room to rise, but experts think otherwise. Experts noted that a local real estate boom is unlikely in the short term because of the Chongqing municipal government's regulations over the market.

The Chinese central government will also continue to clamp down on the once-sizzling domestic real estate market, putting pressure on any overheated local markets in the country, Yan told the Global Times on Monday.

Tightened regulations

Huang, who has been working in Chongqing for 15 years, made a great contribution to stabilize the local real estate market.

In 2016, the Chongqing municipal government made reducing the amount of unsold residential property a priority for the year. In February, it announced a plan to advance its supply-side reform by cutting 10 million square meters of housing inventory over the following two to three years, according to a report on the local news portal

The local government cut the city's inventory of unsold housing by 4.55 million square meters in the first half of 2016, the Xinhua News Agency reported in July - in line with its target to slash the inventory by 8 million square meters in 2016.

Huang also beefed up measures to tame local property developers. At a meeting in September 2016, he announced plans to close 500 real estate companies every year going forward, the Legal Daily reported in September.

Huang also vowed in three years to shut down about 1,500 "shell" property developers, which are usually subsidiaries of companies in unrelated industries. Huang said the "shell" companies were raising money indiscriminately to invest in housing when circumstances were sound, according to the Legal Daily report.

Huang's regulation of the ­Chongqing housing market was effective, and many local property developers are having a hard time as some small companies struggle to survive, said Hui Jianqiang, a research director with real estate information provider Beijing Zhongfangyanxie Technology Service.

Other measures also helped keep the market from overheating. Chongqing is the only city other than Shanghai to institute a property tax.

Under Huang's administration, the local government in December 2008 introduced a land ticket transaction system creatively that allowed farmers to trade land use rights for cash.

Chongqing's housing market has remained stable over the past years because its supply of property has remained abundant while demand has not risen rapidly, Hui said.

"Chongqing sets a good example for other overheated housing markets like those in Beijing and Shanghai. Balancing supply and demand will play a key role in reining in red-hot housing markets," Hui told the Global Times on Tuesday.

Future prospects

Meanwhile, many domestic property developers are stepping up efforts to invest in Chongqing's housing market.

On December 23, real estate companies including China Vanke Co and Poly Real Estate participated in an auction for three plots of land in Chongqing, the 21st Century Business Herald reported on Friday.

On December 27, 14 property companies competed for two plots in the city's Central Park, one of the largest open public parks in the city, the report said.

Property developers are eager to buy land because uncertainties are emerging after Huang's resignation, Hui said, noting that these companies are doing so to avoid possible future restrictions on land sales.

"Indeed, a growing number of potential buyers from Chongqing and other cities have asked me about the current housing market in ­Chongqing," said a local property agent in Chongqing, who declined to be identified.

"Less speculation exists in the local market compared with other cities, and home price here would only rise, not fall," the agent told the Global Times on Monday, noting that it is also possible that more people will be inclined to buy homes in the city.

But if Chongqing's housing prices surge, restrictions will be introduced to tighten the market as the central ­government has already demonstrated its resolve to stabilize the domestic property market and control ­speculative buying, said Yan, the analyst with the E-house China R&D Institute.

Experts said that Zhang ­Guoqing, the acting mayor's policies for Chongqing's real estate market will likely follow Huang's lead, and home prices in the city will only rise within a reasonable range. 


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