Home sales in first-tier Chinese cities fall sharply

17:30, April 29, 2010      

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The volume of home sales in 21 cities fell between April 19 and April 25 compared to the previous week, according to the latest weekly report of real estate markets in 35 Chinese cities released by the China Index Academy. Under the influence of recent control policies, more real estate developers in first-tier cities have taken a wait-and-see approach while housing transactions in some second-tier cities remain active.

The volume of home sales in second and third-tier cities increased

According to statistics, there was a general decline in the volume of housing sales in first-tier cities last week, of which, Hangzhou witnessed the largest decline, down 73 percent from the week before last. Of the 10 key cities monitored, nine witnessed a decline in the total area of houses sold, and four first-tier cities all witnessed a decline in home sales, with Shenzhen down 64 percent, Beijing down 45 percent, Shanghai down 38 percent, and Guangzhou down 2 percent. However, the real estate transactions in some second-tier cities remain active. Harbin, Haikou, Dalian and Changsha all witnessed a sharp rise in the total area of houses sold.

On the whole, housing prices fell to a certain degree in most cities. It is worth noting that Shenzhen, which witnessed a sharp decline in the area of houses sold, enjoyed an average price increase of 12 percent from the week before last.

The control policies have obviously produced different effects on first and second-tier cities. Some insiders said that first-tier cities witnessed a far bigger decline in the area of houses sold than second-tier cities, indicating that the control policies mainly drove away speculative investment. Moreover, housing prices in first-tier cities were already too high even before the implementation of the policies, so the markets there are more sensitive than those in second and third-tier cities. Therefore, developers in first-tier cities have taken a wait-and-see approach earlier than their counterparts in other cities.

Housing prices in quite a few cities remain stable despite the fall in transaction volume

The average housing transaction prices have currently remained stable and even been slightly higher despite the fall in housing transaction volume. The fall in housing transaction volume but the stability in prices mark that the stalemate situation in the housing market has generally come into being.

Since April 14, a series of housing regulation polices have been issued. During one week, the Ministry of Land and Resources released the land supply plan for 2010 on April 15, under which, the land supply for social security housing and small and medium-sized housing will increase markedly. Then, the Ministry of Housing and Urban-Rural Development released a circular to strengthen the oversight and regulations in the real estate market and perfect the commercial housing pre-sales system. Commercial banks have also taken efforts to curb the issuance of second-house mortgages.

Chen Guoqiang, director of the Real Estate Research Center under Peking University, said that the unprecedented strong regulation policies have positively guided public expectations and will possibly cause housing prices to return to a rational level. However, it is currently impossible to accurately quantify the effect of the policies on housing transaction volume and prices, he said.

Therefore, the current changes in the housing market cannot simply be viewed as a "turning point" in the market. The future development of the market depends on both the trend of follow-up regulation policies and the effect of the existing policies.

By People's Daily Online


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