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New curbing policy causes market slump

By Fang Yunyu (Global Times)

10:56, March 05, 2013

Chinese stock markets plunged Monday following the authorities' latest efforts to cool down the country's overheated real estate industry.

Real estate companies saw their shares dive by 8 percent on average, which also affected the stocks of related industries, including cement, machinery and steel.

The benchmark Shanghai Composite Index dived by 3.65 percent to close at 2,273.40, while the Shenzhen Component Index declined by 5.29 percent to end at 9,139.75.

However, some analysts and experts told the Global Times that markets may be overreacting to the newly unveiled property control measures.

"The new policy should not have hit the stock markets this much. Capital markets usually overreact to government policies," Hui Jianqiang, head of research at Shanghai-based E-house China Research and Development Institute, told the Global Times Monday, noting that the new policy may rein in second-hand home sales, but could have a positive influence on new home sales.

According to the policy, announced Friday by the State Council, a 20 percent tax will be imposed on profits from second-hand home sales. Hitherto, the government has required home owners to pay 1 to 2 percent of the total price.

"So we estimate that people would prefer to buy new houses rather than second-hand ones, considering the high tax, which will be added into buyers' bills for sure," said Hui.

Jiang Weixin, minister of Housing and Urban-Rural Development, told reporters Monday that the policy has only just been unveiled, so "let's have a try for some time first."

Zhang Qi, an analyst at Shanghai-based Haitong Securities, told the Global Times that he agrees with Hui's opinion. "We forecast that the Shanghai index would drop by 1-2 percent, but such a large decline is definitely an over-response," said Zhang.

Zhang also said local governments might not carry out the new policy thoroughly, because the revenue from the industry is a crucial part of their income.

Qi Ji, deputy minister of Housing and Urban-Rural Development, said Monday that local governments will announce detailed measures to curb the rise in real estate prices at the end of this month.

According to data released by Beijing-based real estate research institute China Index Academy, new home prices across 100 major cites went up by 0.83 percent on average in February compared to January, the ninth consecutive monthly rise.

"After various curbing measures, the prices of homes are still increasing, which shows that the authorities' efforts are all in vain," Yin Kunhua, a professor at the Real Estate Research Center of Shanghai University of Finance and Economics, told the Global Times.

Yin said the new policy will hurt the shares of real estate companies for a while, because in most cases Chinese families would sell their old houses in order to get the money to pay the down payment for their new homes.

"So this policy directly attacks the second-hand home sales, and will generate a negative impact on the property market as a whole in future," said Yin.

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Email|Print|Comments(Editor:LiangJun、Li Zhenyu)

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