New policies stage a 'surgical strike' on housing speculation

15:17, April 19, 2010      

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After increasing the down payment for second homes to 50 percent, the State Council again issued a notice allowing commercial banks in areas where housing prices are too high or are rising too quickly, and where housing supply is tight, to suspend loans for third homes and beyond.

The State Council also called for the temporary suspension of housing loans for non-residents who cannot provide one year's worth of tax-payment certificates or security fee-payment certificates. The State Council also urged the Ministry of Finance and the State Administration of Taxation to jointly formulate relevant tax policies to guide rational housing consumption and adjust the distribution of the returns on real estate investments.

According to industry experts, the State Council has now promulgated more rigorous, comprehensive and far-reaching policies to curb the soaring housing prices because policies promulgated in late 2009 have not produced much effect.

An unprecedented move

"The policies enacted this time will effectively crack down on real estate speculation in some cities by containing irrational demand," said Zhu Zhongyi, vice secretary-general of the China Real Estate Association.

Zhu said the real estate market will stabilize and soaring housing prices will be put under control in the near future as relevant polices go into effect and will have negative effect on people's expectations. He added that housing prices might even go down in some regions and market participants will gradually become rational and calm.

Sellers lower prices, potential buyers just wait

An executive from a Beijing-based housing agency said that potential buyers have much less desire to see housing projects over recent days, while more sellers are willing to moderately cut prices. Only a minority of potential buyers are eager to buy and hope to close deals as soon as possible in order to reduce the amount of down payment before the new housing policies are adopted.

An executive from housing agency 5i5j said that as short-term speculators have tried to rapidly sell off their houses over the recent period, the mania psychology of house-owners as ordinary sellers has gradually subsided. The housing supply volume in areas such as Tongzhou and Wangjing, where hot speculation has been seen over the recent period, has increased by 30 percent, while the number of potential buyers has decreased by 25 percent. The transaction volume in the weekends in early April dropped by 20 percent from the previous weekends as well. With transaction prices stabilizing, the phenomenon of owners continually raising prices or breaking transaction contracts has generally disappeared.

"Potential buyers have considerably lowered their expectations on a continued and rapid rise in housing prices and are universally hopeful about the effect of the housing-regulation policies," said Zhang Yue, a market analyst from Home Link. She added that the wait-and-see attitude held by buyers and moderately-lowered prices offered by sellers will cause Beijing's housing prices to stabilize in the future.

A balanced market is expected

"We held a temporary meeting on the evening of April 15 and concluded that the government would likely issue more serious policies," said a sales manager of a housing project. "If the sales volume drops dramatically, we will adapt to the changes in the market by moderately lowering prices."

Industry insiders said they believe that in the medium and long-term a series of regulatory measures will restrain panic housing purchases seen in the current market. Those who want to buy houses to improve their living conditions will make more considerations about their financial strength before purchasing, and the demand of speculative buyers will be firmly curbed. Generally, the housing transaction volume in the market is likely to drop markedly and potential buyers will choose to wait and see.

Zhu said that with the fall in the housing demand and the rise in housing supply as a result of the completion of new housing projects and the sell-offs by speculators, the distorted market supply and demand will become balanced and housing prices will stabilize and become rational. In light of a series of policies, the proportion of the first-house buyers and small and medium-sized house buyers to total buyers will rise. Real estate developers should follow the trend and develop products welcomed by the market.

"With the eased contradiction between supply and demand and the return of rational housing prices, the transaction volume in a stable market will slightly expand in the long run, which will benefit the long-term stable and sound development of the real estate market," Zhu said.

By People's Daily Online


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