Thursday, 22 December 2011

Beijing keeps brakes on for homebuyers

Curbs designed to slow down housing development and limit price rises look set to stay in place in many mainland cities, sparking fears of a market slide

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Guanyu 道 said...

Beijing keeps brakes on for homebuyers

Curbs designed to slow down housing development and limit price rises look set to stay in place in many mainland cities, sparking fears of a market slide

Peggy Sito
22 December 2011

Local governments across the mainland are extending policies designed to restrict home purchases, triggering fears that the housing market will slide next year.

The Shanghai municipal government said on Tuesday that it would continue next year with measures that restrict the number of homes purchased, in an attempt to slow down housing development in the city.

Beijing, Guangzhou, Haikou, Shenzhen, Qingdao, Fuzhou, Changchun and Xiamen have all also announced that they would continue with restrictions on property investment.

The central government in January announced eight measures to slow the property boom, including curbs on lending and limits on the number of flats that can be bought by registered residents. In all, 46 cities have brought in home purchase restrictions, which vary from city to city. Eleven cities, including Fuzhou, Xiamen, Haikou and Qingdao, had previously said the policy would end on December 31. Now, however, the Ministry of Housing and Urban-Rural Development has suggested that local governments continue the policy of placing limits on home purchases.

Alan Jin, head of regional property research at Mizuho Securities Asia, said: “It would trigger a revenge rally for housing prices if the restriction is taken away now. Local governments may deem it politically incorrect to oppose central government policy.

“The market is heading down and it will fall further with the current policy regime, where both high-end and mass-market demand is hurt.”

Prices fell last month in 49 of the 70 large and medium-sized cities tracked by the government, the National Bureau of Statistics said last week. This was a sharp rise on the 34 cities reporting price drops in October. The secondary market is also falling, with 51 cities witnessing dropping prices, up from 38 in October.

Thomas Lam, research head at Knight Frank’s greater China division, said sales volumes would plunge next year by as much as 40 per cent, while house prices may fall by 10 to 25 per cent.

Lam said the central government could relax measures in the second half of they year if local governments were hit by a severe decline in revenues because of the slowdown in the property market.

In October, Foshan in Guangdong became the first municipality to try to ease limits on property purchases, allowing residents to buy a second house. However, the plan was called off within 24 hours.

Premier Wen Jiabao said in late October that the government would firmly maintain control over the property market, including restrictions on home purchases and bank loans.

Last month, Vice-Premier Li Keqiang also said that the government should maintain the curbs.

Lee Wee Liat, regional research head of property at Samsung Securities (Asia), said that even though the restrictions on buying homes would not be removed, he expected to see modest relaxation in liquidity controls next year.

“With the banks getting new loan quotas in the first quarter of 2012, there will be more liquidity and it is expected that more lending will be offered to potential buyers,” Lee said.