Shenzhen ups property controls

08:27, June 10, 2010      

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The Shenzhen government approved Tuesday a new supervision regulation for the local property market, stipulating that developers have to open a special account in commercial banks, depositing 15 percent of their total investment into a real estate development project.

Prior to selling, developers are required by the regulation to file the sales prices with price regulation departments, and they need to re-file if prices change by more than 15 percent.

The regulation also states that price regulatory departments must monitor changes in home prices and penalize companies violating rules.

The major objective of the policies is to ensure the stability of the market, Ma Xueming, senior director of CBRE Research (China), told the Global Times Wednesday.

The 15 percent investment requirement "raises the bar for the 'eligibility' of developers participating in real estate developments so as to ensure a more regulated market environment," Ma said.

Those with weak financial backgrounds will be "filtered from the market," Ma said, adding local banks could also reduce potential loan risks.

The price pre-registration ordered by the regulation will also make it easier for local govern-ments to monitor the property market and avoid fluctuations.

In May, the Shenzhen government said loans for third-home purchases would be halted for the moment, and home loans were suspended to non-local residents unable to provide proof of tax payment or payment of social insurance in Shenzhen for more than a year.

Shenzhen is among several cities including Beijing and Shanghai that released city-specific tightening measures after the central government unveiled measures to curb the property market in April.

The tightening measures have had an impact on the local market, while home prices remain at a high level.

New home sales dropped nearly 60 percent by area in May compared with April in Shenzhen, while new home prices only slipped 4 percent to an average 19,653 yuan ($2,877) per square meter, according to the local Urban Planning Land and Resources Commission.

Shenzhen is not atypical. Home transactions in 30 major cities tracked generally saw a decline of more than 40 percent in May over April, while home prices in many cities continue to jump, though the month-on-month rise narrowed sharply, according to the China Index Academy, a real estate research institute.

"In the short term it is not expected there will be significant price drops in China, although (there has been a) substantial decrease in transaction volumes," Ma said.

Source: Global Times


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