Amid signs that another destabilising property bubble may be brewing, over 20 Chinese cities have now imposed measures to quash rampant levels of speculation in the market.
The latest restrictions vary from city to city, but many include higher mortgage downpayments for non first-home buyers, an attempt by policymakers to stem further cash entering into what are already hot property markets.
After some ridiculous price gains over the past 18 months in major east coast cities, which coincided with a relaxation of property restrictions and additional monetary policy easing, it seems a sensible approach.
According to figures from China’s National Bureau of Statistics, house prices in Shenzhen – China’s hottest and probably bubbliest property market – increased by almost 37 percent in the year to August, outpacing gains of 30% and 27% in Shanghai and Beijing, the two other major cities.
While in many instances the measures are relatively new, they already appear to be having an impact.
According to Reuters, property agents said prices of new homes sold in the southern city of Shenzhen and in Beijing dropped 20% during Golden Week in an attempt to entice buyers, a noticeable decline in what is usually a busy period for property sales.
“The new tightening measures are quite stringent,” Alan Cheng, general manager of realtor Centaline Shenzhen, told Reuters. “It’s a blow to confidence and people are worried that prices will drop, so they are observing from the sidelines now.”
Despite the sharp drop in sales prices, something that accompanied an even more dramatic decline in new property available for sale in many major cities, agents said it was too early to tell if the tightening measures would reverse the rally across many of China’s major cities, pointing out that credit remains loose and demand was still high.
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