Government measures to cool off the overheated property market have prompted prospective buyers across the country to postpone purchases, depressing prices in Shanghai and slowing down price increases elsewhere.
In Beijing, Shanghai, Guangzhou and Shenzhen, house-hunters say they are holding off taking the plunge because they expect prices to continue to fall in the near future.
And it is this approach, already reflected in the drop in sales in nearly all the major cities, that will ultimately decide the true impact of government measures and the development of the property market.
In Shanghai, sales of new apartments in June dropped by half from a month earlier and prices in the first six months fell an average 6 per cent from the same period last year.
Property agents from Beijing to Shenzhen have been bemoaning the loss of business, and it's only a matter of time before sellers cut prices as their counterparts in Shanghai have, property agents say.
That's exactly what Yao Lan, a 28-year-old journalist in Shanghai, has been waiting for. She and her husband have been looking for a bigger apartment since the birth of their daughter earlier this year. Like many Shanghai households, both husband and wife have to work to support the family. Childcare, therefore, is entrusted to the baby's grandmother, who will have to move in, increasing the household to four.
"The one-bedroom apartment we have now is obviously too small for the four of us," Yao said. For the Yaos, looking for an apartment with an easy commute to the central business district in Puxi where they work has been a frustrating experience. They soon found that apartments that fit their requirements in size and location were way out of their budget. "If we had taken the plunge, the monthly mortgage repayments would have been extremely tight," Yao recalled. "We wouldn't have had any money left to spend on anything other than the essentials."
Based on their combined income, the Yaos calculated that the most they could afford was about 900,000 yuan (US$112,500) for a new apartment. But most of the apartments they looked at in the locations of their choice cost well over 1 million yuan (US$125,000). "The cheapest apartment we thought was suitable cost 1.5 million yuan (US$187,500)," said Yao.
After weeks of searching, the Yao's gave up on the idea of buying a new home. "We had no choice but to make do with our tiny apartment," Yao explained. "My mother has been really understanding, but I still felt guilty."
Last month they read in the local newspaper that property prices in Shanghai had dropped. "We couldn't believe it at first," Yao said. "We had wanted to rush straight to the property agent to start searching all over again."
But the couple found that their luck hadn't changed as much as they had hoped. Property prices in Shanghai had come down on average, but in their preferred locations they remained firm. But Yao and her husband are hopeful. "We believe that prices of the apartments we want to buy will come down," she said. "We have waited so long, we can afford to wait a bit longer."
Also playing the waiting game is Fang Liming, who is planning to buy his third home in Beijing. Business has been good for the 38-year-old designer, who is always on the look-out to trade up. "I work from home and I find that I am always in need of more space and a better environment to help sharpen my creativity," Fang said.
He bought his first home, a 50-square-metre apartment in a residential complex, in 1998 when he was a fledgling designer new to the business.
With wider recognition and increased income, Fang traded up in 2002 to a 120-square-metre apartment in a secluded block on a quiet tree-lined street. "To me this was the ideal place to live and work," he said. "The rooms are spacious with lots of windows and the surrounding environment is quiet and serene."
But an ad for plush apartments in a new development caught his eye not long ago and once again inspired him to upgrade. Only one thing stopped him from buying the 200-square-metre apartment in an upscale residential district: the high deposit required for mortgage financing.
In line with the government's clamp down on excessive speculation, banks have raised the minimum down payment for mortgage loans to 30 per cent of the total property price. Previously the minimum payment was 20 per cent.
Fang said he doesn't have enough ready cash to pay such a high down payment and he is reluctant to sell his current home in a weak market. "I haven't made a decision yet," he said. But "I think I may have to put the whole thing on hold for a while You never know, the price may come down tomorrow."
In Shenzhen it is a similar story. Yang Qing, a government employee in her 30s, said she and her boyfriend simply can't afford the 30 per cent down payment to obtain a mortgage loan. "We are already paying 1,200 yuan (US$150) a month in rent where we live at the moment," she said. "It is a big chunk of our combined income and after rent and paying for essentials we have very little left over to save."
Fang Shan, a 28-year-old white-collar worker at a multinational company in Beijing, and his fiance, have decided to press ahead with buying an apartment regardless of market uncertainty. "Property prices in Beijing will not come down," he said. "No matter what the government does, high demand will keep prices up."
And he has no time to wait for the market to prove him wrong. "We have got to buy an apartment before we get married," Fang added. "This is what we both want."
Fang said he has been sharing an apartment with a colleague since he came to work in Beijing two years ago. His fiance is also sharing an apartment with her friends.
Source: China Daily