Property sales slump in three Chinese cities as tough market cooling measures takes effect
Property sales in three major Chinese cities fell by as much as 70% in May as developers delayed sales in the face of the government’s tightening measures aimed at cooling the real estate market.
Figures published by the Shanghai Securities News show that property sales fell almost 70% in Beijing, by 70% in Shanghai and by 62% in Shenzen. It is the first firm indication that cooling measures may be having an effect as the country has experienced soaring property prices.
The Chinese government has introduced a variety of measures, including curbing loans for third home purchases and restricting pre-sales, to quell the threat of an asset bubble.
Developers are also postponing projects, according to analysts from Citigroup. ‘We expect more measures to be introduced on developers, especially those to monitor construction schedule and restrict cash flow, thus pushing developers to cut the price earlier,’ said Oscar Choi and Marco Sze, Hong Kong-based analysts at Citigroup.
Most developers are postponing project launch dates and are waiting to see market developments before finally pricing new projects, they said in a report.
In Shanghai developers have delayed sales of new residences because the municipal government hasn’t announced its property policy. Only 46 of a scheduled 96 developments were put on sale during May.
Tough measures to curb the market should have been put in place a lot earlier, according to Lu Qilin, a researcher at property consultants Uwin in Shanghai. ‘If the government doesn’t stop this soon, the bubble will burst,’ he said.
China’s property market problems are worse than in the US and UK, according to Li Daokui, a member of the Chinese central bank’s monetary policy committee. He told the Financial Times that the country’s housing market problems combine a possible bubble with the risk of social discontent.