Real estate sales in Shenzhen, Shanghai and Beijing dipped as much as 70 percent last month as property developers delay sales after the central government launched its tightening measures.
The Chinese government has restricted pre-sales by developers, raised minimum mortgage rates, curbed loans for third-home purchases and tightened down payment requirements for second home purchases.
In Beijing, property signings dipped almost 70 percent to 3,357 last month from April, according to reports. In the nation’s financial centre, Shanghai, transactions may have dropped nearly 70 percent to 2,550 signings, and in the China’s industrial city of Shenzhen, sales fell 62 percent.
The Chinese government is trying to peel back a plan and a US$1.4-trillion lending binge that revived the economic growth while posing risks of asset bubbles.
“The government should have put in tougher enforcement earlier to prevent the high prices. If the government doesn’t stop this soon, the bubble will burst,” explained by Lu Qilin, a Shanghai- based researcher at UWin.
An index tracking 34 property companies traded in Shanghai dropped 2.2 percent as of 1:13 pm on Wednesday, stretching this year’s loss to 30 percent. The country’s biggest listed developer China Vanke Co fell 1.3 percent to 7.12 yuan, while Poly Real Estate Group Co dropped 3.9 percent to 10.62 yuan.
Figures released by the National Bureau of Statistics showed that property prices increased to a record high of 12.8 percent in April compared to the previous year. New home transactions in Shanghai dropped 56 percent to 520,000 sq m (5.6 sq ft) in the month that ended May 16, said Mr. Lu.
The country’s real estate market problems are worse than in the UK or US before the financial downturn, according to sources.
Shanghai’s plan to start a real estate tax on residential property has been submitted to the Chinese central government for further review. The city may impose the tax on people who do not file their income tax declarations for three years or more and those without residence permits.
Gao Jian, a Northeast Securities’ analyst based in Shanghai, expects a drop of prices of about 20 percent if the property tax comes into effect.
“We’ve seen downward pressure of housing transactions and prices, and the correction is likely to continue in the next one to two years,” he said.