Government measures fail to stop market surge in Greater China

HONG KONG: Property markets across Greater China are finding themselves in the same boat -- fearful that last year's lending binge may have created a bubble.

In response to those concerns, the authorities have since March taken measures to cool their overheated markets. Except for the mainland, the measures have had little impact so far.

In Taipei, prices rose 20% to NT$27,778 (HK$6,858) per square foot last year, according to property consultant DTZ. Until the latest measures, prices had risen a further 10% so far this year.

"Prices have hit historical highs in Taiwan," said Billy Yen Ping-li, DTZ's general manager in Taipei. "And expectations are that prices will continue to rise.

"Buyers expect property prices to rise significantly after the government signs the economic co-operation framework agreement with the mainland government, as they did in Hong Kong after it signed the closer economic partnership arrangement in 2003."

The Taipei government hopes to reach an agreement by next month.

Yen said home prices were also driven higher by the record prices at government land sales last year. This led developers and homeowners in nearby areas to raise the prices of their flats substantially.

As social discontent over affordability in the market worsened, the government suspended the sale of sites in March.

However, the mainland and Hong Kong took a different approach in their attempts to curb price growth -- by increasing land supply.

Last month, the mainland announced that 80,000ha of land for private housing would be released for sale this year, compared with 76,000ha last year. In Hong Kong, the government will sell four development sites by July.

While the Hong Kong government is not willing to resume projects under the subsidised Home Ownership Scheme, the mainland has increased the construction of low-cost schemes. In Taiwan, the government plans to build more than 4,000 flats for the lower income group.

While a year-long loose monetary policy has been identified as the main cause of the asset bubble in the region, all three governments have begun tightening their lending policies to the property sector.

"The Taiwan government ordered banks to tighten lending to investors and developers in March. Investors now have to make higher down payments and the government hopes to keep them out of the market for the moment," Yen said.

The move, together with expectations that more measures might be taken, had helped cool the property market as transactions fell in the past two months, he said. "But prices continued to rise 5% to 10% in the past two months," he added.

Yen expects prices to continue to rise despite the government measures. "We are facing an influx of capital and tight housing supply. Property prices will continue to rise, but the growth will slow in response to government policies," he said.

Meanwhile, property sales in Beijing, Shanghai and Shenzhen have plunged by between 40% and 70% since the government imposed new cooling measures last month.

According to Dickson Wong Hung, Centaline Property Agency's chief executive for northern and southwest China, the decline is not over yet. He expects prices to drop a further 30% by year-end.

In Hong Kong, the Centa-City Leading Index, which tracks the price movements of second-hand properties, rose to 80.68 last week, the highest in 12 years. – South China Morning Post

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