Gov't regs start to cool China's housing market
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People's Daily, September 30, 2011
The Chinese central government's sustained tough control measures on its property market appear to be paying off, according to the latest statistics. The rising housing prices in many Chinese cities have been greatly curbed, and signs of lower housing prices have appeared.
Transaction volumes fall, home prices stop rising
In many cities, developers have stepped up sales efforts, and transaction volumes have fallen. Secondhand homes are becoming more expensive than new homes. These three signals indicate that housing prices could fall.
About 13,000 new and secondhand homes were sold in Beijing from Aug. 1 to Aug. 30, down over 26 percent from the previous month to the lowest level since 2009. The average prices of new and secondhand homes dropped nearly 3 percent and nearly 1 percent, respectively, from July to August. Home sales in Shanghai and Shenzhen also declined.
According to data from the National Bureau of Statistics, 16 of China's 70 large and medium-sized cities saw month-on-month drops in housing prices in August, and home prices in 30 cities remained unchanged from the previous month. Many more Chinese cities saw home prices drop or stay flat in from July to August. Furthermore, it was the first time since 2009 that home prices stopped rising on a month-to-month basis in more than half of the 70 cities.
According to Huafang Real Estate Development Company manager, the trading volume on the current housing market is shrinking, housing prices have stopped rising and there is more room for continued price declines. Some consumers think it is a good chance to buy houses now and others still prefer to keep a wait-and-see attitude.
Most real estate companies are facing financing difficulties. Now that the central bank has tightened monetary policy, it is more difficult for developers to find funds, and the financing cost has increased. Apart from several enterprises, most of developers are very cautious to buy lands.
Control policies have produced continuing effects
Loose house prices are the result of the central government's control policies. Since 2010, the central government has put forward a series of real estate control measures. The manager of the Huafang Real Estate Development Company said that the government's control policies have produced lasting effects.
According to experts' analysis, the housing purchase limitations and decrease in currency supplies are direct reasons behind the drop speculation in order to squeeze out bubbles. As China increases security-housing supply and eases the conflict between supply and demand, the basis for high housing price bubbles can be gradually eliminated.
Wang Yulin, deputy director of the Policy Research Center of the Ministry of Housing and Rural Construction, said that control polices will be further enhanced in the future because housing prices may rebound if policies are slightly eased, which would reverse the control policy gains made in the previous years.
Industry insiders said that the government should continue to exert more effort on implementing macro-control polices to contain housing investment speculation and should also prevent the excessive rise of housing prices in second and third-tier cities where limited housing purchase policies have not been implemented.
It is learned that housing prices in some regions where limited housing purchase policies have not been implemented and some second and third-tier cities have started to soar. Meanwhile, housing prices in downtown areas of first-tier cities remain high. Take Beijing as an example. Although housing prices within the fifth ring road have dropped compared to the peak period last year, the decline is very limited.
Trend of decline in housing prices emerges
Has the price of housing arrived at a turning point? According to the latest report by the Agricultural Bank of China, the continual drop in the housing price growth cannot be interpreted as the arrival of the turning point of the housing prices, and it is perhaps overly optimistic to assert that the turning point of the housing prices has been reached. The report said that the double-dip risks are on the rise and a shift to the current tight fiscal policy will likely occur anytime amid the current complicated domestic and international economic situation.
Experts said that it caution should be used when talking about a turning point because of factors including the inflows of hot money from abroad, the lack of investment channels, uncertainties in the construction of affordable housing and the over-reliance of local governments on the real estate industry.
An officer from Huafang Real Estate Development Company said that the decline in housing prices has already emerged. Following the drop in housing transaction volume, real estate developers will not reduce housing prices until they have to. If the central government's regulatory housing policy remains unchanged, the housing prices will surely fall.
