Policies produce instant results By Guo Jian'er and Jiang Xiaoyang (China Daily) Updated: 2005-06-03 09:45
SHANGHAI: Government measures to curb property speculation are having an
instant impact in Shanghai, the country's hottest market, sending prices down
and buyers to the sidelines.
On Wednesday, when the new property policies took effect, there were 358
daily transactions of new homes in Shanghai, compared to 462 on May 9 and 604 on
March 16, according to eHomeday, Shanghai's biggest property Internet portal.
Average transaction prices fell to 5,884 yuan (US$711) on Wednesday, down 19
per cent from a day before. But prices downtown remained stable.
The latest setback has many home buyers, property agents and developers
wondering if the wildly overheated market has reached a turning point. They seem
uncertain about its future direction as the full impact of the government
measures has yet to take full effect.
Property agents said the strong measures aimed at clamping down on property
speculation will effectively curb demand and affect sales of apartments in new
projects.
A recent survey carried out by Colliers International, a leading property
services provider, shows that 65 per cent of buyers of units at six property
projects with an average price of more than 12,000 yuan (US$1,440) per square
metre in Shanghai were owners-occupiers, while the remainder were investors,
including some speculators.
The survey shows the proportion of investors in the Shanghai property market
is "unhealthily high," said Lina Wong, managing director of Colliers
International (East China).
Shanghai doubled its sales tax on luxury homes to 3 per cent from Wednesday -
a response to a recent central government directive to curb property
speculation.
Seven ministries, including the People's Bank of China and Ministry of
Construction, issued a joint decree on May 11 that sets out a wide range of
measures to cool down the property market, including a 5 per cent tax on
property owners who sell up within two years of purchase. The decree, effective
as of June 1, allows local governments to make detailed policies according to
their particular situation.
Shanghai has also doubled property tax - to 3 per cent - on luxury homes,
defined as those located in the city centre and costing more than 17,500 yuan
(US$2,108) per square metre with an area of at least 140 square metres. Cheaper
and smaller flats are labelled "affordable," with the current rate of 1.5 per
cent left unchanged.
The property market has been slowing down for a couple of months as it felt
the chill of the new policies in the lead up to June 1. The decline has prompted
Wong to call this the "turning point."
Residential property prices in Shanghai fell by an average 9 per cent to
8,097 yuan (US$978) per square metre in April from the previous month. The
biggest fall in residential sales in terms of floor area was in peripheral
districts including Zhabei, Putuo and Minhang. Together they registered an
average decline of 40 per cent in April.
The number of transactions in the secondary market also dropped - by 50 per
cent - during the period, according to Midland Properties (China), a leading
estate agent based in Shanghai.
"It is obvious that the market is very quiet in the past several weeks," said
Calvin Lau, Midland's regional director. "Understandably, many potential buyers
are holding back from making a purchase while waiting for the dust thrown up by
the government actions to settle."
Meanwhile, more and more sellers are lowering their prices to unload their
properties before the market can get any worse.
Among these keen sellers are the many speculators who are beginning to feel
the intensifying heat of the government-initiated credit crunch.
The Shanghai region is believed to be the primary target of the government's
tightening-up policies as it has experienced wild speculation in recent years.
In some places in Shanghai and neighbouring cities such as Nanjing and Hangzhou,
property prices jumped three or four-fold over the past three years.
CCTV launched a special report this week about how some speculators in the
region are vying to sell their stocks before it is too late. While there are
some sellers asking every estate agent they can find to promote their property,
there are many agents that have had to shut down after not clinching a deal for
weeks.
But some analysts nevertheless see a solid leasing market.
"Rental is expected to stay on a rising trend because demand has already
outstripped supply resulting from the continuing inflow of multinational firms
to the city," said Anton Eilers, regional residential director of Colliers
International.
He said the company has received a growing number of enquiries about the
leasing market in Shanghai, not only from Fortune 500 companies but also some
little-known foreign firms that plan to set up branches.
Eilers projected the luxury residential rental market for expatriates to
surge by 12 per cent from its current level of US$23 per square metre per month,
over the next year.
Echo Xu, from the human resources department of Dulwich College Shanghai,
told China Daily that the housing allowance for its foreign staff had already
gone up 25 per cent to US$1,000 per month in the past 12
months.
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