China’s newest measures to cool down the property market will not lower prices but rather, result in pent-up demand, said Jason Leow, Chief Executive of CapitaLand China.
The Chinese capital is worried about overheating in the property market, after several months of escalating home prices caused widespread resentment over increasingly unaffordable housing.
Aside from increasing interest rates three times since October, the central government asked local governments to implement restrictions, which include barring residents from purchasing third homes and beyond. This comes after previous measures such as higher mortgage rates and down payment requirements had only little impact.
Longer-term measures — higher interest rates, stamp duty and property tax — would be more effective in managing in the market, said Mr. Leow in an interview.
He added that some of the company’s customers have withdrawn purchases not because of extremely high prices but due to new ownership limits.
“The good thing is that we’re in different sectors, which are affected by policy changes to a different degree,” said Mr. Leow, adding that CapitaLand China’s office and retail operations are also gaining from the efforts of the government to improve domestic consumption.
Mr. Leow said the restrictions of the government on the number of units residents can buy will rein in demand in the short term but demand will be very strong in the long term.
Other factors including higher disposable incomes, urbanisation and a limited number of investment options that can act as a hedge against inflation will still make China’s real estate market attractive, he added.