More medicine to cool raging property fever

HONG KONG: The mainland property market is in danger of getting policy frostbite, such is the fervour with which  Beijing is introducing measures to cool overheated prices.

The latest initiative is a mooted freeze on real estate companies raising capital, in the hope they will stop  building bigger and higher apartment towers.

China Daily said yesterday that the Chinese Securities Regulatory Commission would place a moratorium on capital  raising by developers. This could block about 110 billion yuan (RM51.7 billion) in share issues planned by 45  firms, the paper quoted unnamed sources close to the commission as saying.

While the paper in its later online edition said the regulator did not plan to suspend approval of fund-raising  proposals, it quoted it as saying it was reviewing the plans of 59 A-share-listed property firms.

It has also submitted 41 financing requests to the Ministry of Land and Resources to determine if the companies  are developing land in accordance with land-use laws.

"They have something new on the menu everyday," said David Ng, head of regional property research at Royal Bank  of Scotland, who is part of a growing band of property analysts suffering from policy fatigue.

Housing has become a controversial issue on the mainland, with growing public resentment against home prices  that have risen to levels many can no longer afford.

Lee Wee Liat, a senior property analyst at Nomura International (Hong Kong), said: "All measures announced or to  be announced deliver the same message - the government's strong determination to rein in the red-hot market."

Beijing has introduced a raft of measures to cool rising home values in the past month. On April 14 the State  Council said the minimum down payment required on the purchase of second homes would be increased from 40% to 50%, and lending to buyers in this segment of the market would be charged at double the People's  Bank of China benchmark interest rate.

Three days later, the council banned mortgages for people buying their third property, as well as imposing  residency requirements on buyers. Subsequent clarification by the central government tightened the definition of  a second property to include all real estate held by a family other than the one where it lives, whether or not  the first property was mortgaged.

The measures came after property prices in 70 cities rose a record 11.7% year on year last month. Analysts said  home prices in primary markets rose almost 35% with strong volume in the second half of last year.

Prices continue to rise this year. "All measures are gestures to show their determination to cool rising  prices," said Lawrence Hui Wai-man, chief financial officer at developer Shimao Property Holdings.

Hui and Lee said the new measures would cool the market. Hui expected prices nationwide to drop by about 10% to 15% before bottoming out.

Developers are cash rich, meaning they will not slash prices substantially to boost sales while demand remains  strong. Ng, of Royal Bank of Scotland, said pricing strategies for launches during the mainland holiday next  week would be an important indicator of the impact of the measures
- South China Morning Post