Local measures cool down prices in big cities

SHANGHAI: The growth in mainland home prices slowed again in October following new local government measures to damp down the overheated property market.

National Bureau of Statistics data released on Wednesday, Nov 10 showed that property prices in 70 major cities rose by an average of 0.2% month-on-month in October, compared with 0.5% growth in September.

Property prices and transactions began to pick up in September after a pause in August, but the October figures showed the latest government measures helped to brake the growth last month.

The slowdown in first-tier cities, including Beijing, Guangzhou and Shenzhen, was obvious. Average property prices in Guangzhou dropped 0.1% last month, compared with 0.5% growth in September. Shenzhen's average price rose 0.1%, against 1% a month earlier.

However, Shanghai property prices rebounded last month. Prices in the city, including new and second-hand homes, rose 0.1%, compared with a 0.1% fall in September.

"The slowdown in home prices and the sharp fall in property sales in October reflect the impact of the new local government measures at the end of September. Investors are particularly affected by these measures," said Alan Chiang Sheung-lai, head of residential property on the mainland at property consultancy DTZ.

At least nine cities — Beijing, Guangzhou, Shanghai, Shenzhen, Hangzhou, Nanjing, Ningbo, Fuzhou and Xiamen — tightened the limit on new home purchases last month.

Under the new restrictions families who already own a home and residents from other cities are prevented from buying more than one additional home.

"The rise in interest rates also dampened investor demand," Chiang said.

On Oct 19, the People's Bank of China raised the benchmark interest rate by 25 basis points. Banks have also scaled back their preferential mortgage interest rates to 85% of the benchmark rate from 70%, effectively raising the rate borrowers have to pay.

"Market sentiment will remain weak for the rest of this year, as people are worried the government may introduce other cooling measures," Chiang said. — South China Morning Post
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