Economy

Housing market hit by new rules

By Zheng Caixiong and Ang Wang Ying (China Daily)
Updated: 2010-10-20 10:04

14 cities put caps on purchases for residents and on housing loans

GUANGZHOU - Property sales have seen a sharp drop and there's been an increase in the number of cancellations of home orders in Chinese cities that have introduced regulations to limit purchases of property. [Property tycoons suffer decline in their wealth]

Dalian, in Liaoning province, is the latest to join in this move to control the rampant property market. On Tuesday, it suspended second-home purchases for families who are residents, while denying new home loans for migrant families who have not worked in the city for at least one year, said a local official.

At the same time, the amount of deposits for first and second home purchases has been raised.

Thirteen other cities now have similar loan caps and higher down payment to cool down the overheated property market.

In Guangzhou, only 308 apartments were traded online, on Monday, according to the Land Resources and House Management Bureau. This represented a big decrease for a single day.

And the average price was 8,600 yuan ($1,320) a square meter, the first time the price has dropped below 9,000 yuan a square meter in two years.

"The government will stop unreasonable home demand and limit speculation in the property market," housing management bureau officials have explained.

The city's new rules now require buyers to have a household registration, or hukou, and a marriage certificate to purchase an apartment.

Cheng Yun, of Guangdong Centraline Property Co Ltd, said most would-be property buyers have adopted a wait-and-see attitude. Cheng estimated that property prices in Guangzhou will fall at least 10 percent over the next few months.

The restrictions apply to both new and second-hand homes and those below the age of 18 cannot purchase a home by themselves.

Local property agents say that some people who had made a deposit on an apartment have begun to break the agreement because they're worried that prices will fall after the new limits take effect.

Zhou Yuzhong, a lawyer, said that these people will not get a refund on their deposit because of the breach of contracts and some might have to make an extra payment for breaking the agreement.

Property prices in Guangzhou hit more than 25,000 yuan a square meter in the busiest areas in previous months.

Meanwhile, in nearby Shenzhen and on up in Shanghai, where limits on purchases were already introduced, transactions have seen a sharp drop in the past few weeks.

In Shanghai, 799 apartments were handled on Oct 11, but the figure was 420 on Oct 17. Daily property transactions fell by more than 60 percent over the past week, compared with the September figures.

Luo Yinshe?at Midland Realty Shanghai, told China Daily that around 5 percent of buyers have cancelled their new apartment orders.

Related readings:  Corruption in real estate  Property prices up in Sept  China's property prices in major cities up 9.1% in Sept  Boom continues for Beijing's 2nd-hand home market in Q1

The secondary housing market is even more discouraging. Cancellations of orders have risen by as much as 10 percent for some real estate agents as a direct result of the city's new policies.

The ruling that limited the new apartment purchases to one unit per household has changed many property investors' ideas and these have been a major reason for the cancellation of orders.

Meanwhile, those who are buying an apartment for themselves as a place to live in are less influenced by the new policy, Luo said.

Wei Chao,?at the Hulian Housing Agency, admitted that this has been his toughest season since he began three years ago: "Sales of second-hand apartments are down 80 percent after the new policy. But we're in a better situation because some agents haven't sold a single house in the past week.

"Some second-hand home dealers have cut their prices, but they're still getting few enquiries. Many people think that prices will go down further."