HONG KONG: Hopes were high when the State Council issued policy measures in April meant to put the brakes on rocketing home sales, but while the number of deals has fallen by as much as 90% in some locations, prices have yet to drop much. The latest data shows that home prices have fallen by 3% to 5%, according to Xinhua.
Mainland academics and state media blame the stubbornly high prices on local city governments they say did not follow up on the central government's move with "tough enough" measures of their own.
"Local governments were unwilling to curb housing prices because they earned so much of their revenue from land sales," said Chen Jie, a deputy director of Fudan University's housing policy centre.
In an April 14 circular, the State Council announced the minimum down-payment required for the purchases of second homes would be increased from 40% to 50%, and lending to buyers in that market would be charged at 1.1 times the People's Bank of China's benchmark interest rate of 5.31%.
Three days later, it banned mortgages on purchases of a third property and imposed residency requirements on buyers. The central government then tightened the definition of a second property to include any real estate held by the family other than their primary residence, whether or not the first property was mortgaged.
Two weeks later the Beijing city government shocked the market by announcing it would limit families to one new home, one of 12 measures to cool the market.
The measure was described as even tougher than the central government policies.
Other city governments such as those of Chongqing, Guangzhou, Hainan, Shenzhen, Xian and Xiemen announced measures this month, but none were as severe as those introduced by the Beijing city officials.
The measures were described by Xinhua as "moderate". It also said the city governments had not clearly explained how the measures would restrict speculative buying.
Guangzhou had announced 24 measures focusing on increasing land supply, while Chongqing announced a programme of building homes for the poor. But neither introduced restrictions on purchases of third homes, nor on lending for such purchases, Xinhua said.
Chen said it was clear why the Beijing city government had announced the toughest measures. "The Beijing city government is located close to the central government and is under pressure to follow the rules. Other local authorities are further away and try to avoid them."
Now all eyes are on Shanghai, which has yet to announce measures on how to implement the central government's policies, Chen said.
Property agents took a different view, saying local governments had followed up on the central government announcements and predicted prices would drop soon.
When the State Council announced the measures, it gave some flexibility to local authorities, allowing city governments such as Shenzhen's to unveil steps that were not as strict as those Beijing took, said Andy Lee Yiu-chi, head of estate agency Centaline's Shenzhen branch.
But Lee nonetheless expected to see a significant price drop in the coming months.
"Both developers and owners of second-hand homes are now showing a willingness to cut prices because sales continue to be quiet," Lee said. Centaline had helped to broker up to 150 deals a day in April, he said, and that number was now down to fewer than 20 deals a day.
Li Wenjie, head of Centaline Property's Beijing office, said prices had not yet dropped much as the market needed time to digest the measures. He believed home prices would fall by 30% within three months.
According to Beijing official figures, there were 5,210 unfinished flats sold in May compared to 11,952 deals in the same period last year. – South China Morning Post
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