More signs of upcoming turbulence in Chinese property markets…
Shanghai Daily is reporting that real estate developers in the city have been reluctant to cut selling prices, despite signs demand will die without lower prices. The market is facing a potential 70% drop in transaction volume:
“For the whole month, the figure should be around 300,000 square meters, and that could be a plunge from a month earlier when 1.02 million square meters of new houses were sold across the city,” said Lu Qilin, a researcher at the firm. “On the supply side, more than 850,000 square meters of new housing were launched for sale this month, compared with 1.23 million square meters in April.”
Demand is falling since China’s central government announced stricter regulations for property transactions during the middle of April. These involve higher down payments and mortgage rates for the purchase of second home, and act which is seen as potential speculation. Such tightening is reducing buying demand.
Thus a moderately bearish view is that property prices need to come down, since demand is likely down yet supply is the same. This challenge isn’t limited to Shanghai:
China Vanke Co, the country’s largest publicly listed developer, may cut apartment prices by 10 to 30 per cent within three months, the Beijing News said yesterday, citing an unidentified sales agent. Local Vanke officials declined to comment yesterday.
Yet Shanghai is where things could get the ugliest, the earliest. This is because the local Shanghai government is planning to clamp down on speculation even harder than China’s central government already has:
Chen Qiwei, a spokesman for the Shanghai municipal government, did not preclude the possibility of levying property tax when asked about this issue at a press conference on Friday.
“Shanghai will take more strict measures in line with the central government policy,” Chen said, adding that more efforts will be made in building economically affordable houses and cracking down on speculative house purchasing.
Other cities such as Beijing, Chongqing, and Shenzen could have similar additional taxes, but Shanghai is the first to make an official comment such as above according to China Daily. Thing is, any action from Shanghai will likely need approval from the central government. We’ll keep watching this space closely, since we feel the fate of China right now is massively dependent on how the property market unfolds.
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