Beijing’s ‘shock’ measures seize property market, other cities follow suit
- cause for concern
Apr 6, 2017-
Ji Wei, a recently married photographer in her 20s, fears her plans to sell her Beijing apartment and upgrade to one costing 6.15 million yuan ($891,000) will collapse because of new measures aimed at reining in a soaring property market.Beijing, home to about 22 million people, is on the frontline as China takes on speculators and tries to tame home prices. Chinese authorities fear surging prices are building up household debt, heightening banks’ credit risks, and fanning resentment as home affordability fades.
Apartments in Beijing on average are still cheaper than homes in Tokyo or London, but prices hit their 2016 peak in December and have continued to shatter records this year.
Second-hand homes in the capital averaged 63,082 yuan ($9,165) per square metre in March, according to Fang.com, a private provider of home price data - enough to value a modest 90 square metre (969 square feet) apartment at $824,850.
“Prices have surged almost 50 percent for a two-bedroom apartment from when I first started looking in October,” said Jiang Yuan, 33, who works for a big data company.
A previous round of restrictions cut the number of re-sale market deals in Beijing by 37 percent in the three months to end-December, but failed to stop prices rising.
In mid-March, the municipal government acted again - raising the minimum downpayment on a second home to 60 percent from 50 percent. On bigger homes, that minimum increases to 80 percent from 70 percent.
They also suspended issuing individual mortgage loans of more than 25 years, effectively forcing borrowers to take on more expensive shorter loans. Buying a third property has already been banned.
And the definition of a second-home buyer has been broadened to include anyone who has a record of taking out a previous mortgage anywhere in China.
Beijing has also curbed individuals buying new commercial property, and closed a loophole in buyers faking divorce to take advantage of first-home downpayment rates.
The number of new clients expressing interest to buy fell by nearly a third in the week following the latest curbs, and home viewings dropped 30.7 percent, according to data from Lianjia, Beijing’s dominant real estate broker.
It may be too early to gauge the impact on prices, though. Fang.com data shows prices in Beijing’s re-sale market grew 1.07 percent in March, slower than February’s 3.3 percent increase. Official March home price data is due on April 18.
“The market will freeze under the new measures,” said Yi Xianrong, a professor at Qingdao University and former researcher at state think-tank the Chinese Academy of Social Sciences. “Sales may drop 90 percent.”
“It was like an ambush,” said Ji, the photographer.
The prospective buyer for Ji’s flat has now withdrawn, leaving her to find another buyer quickly or risk defaulting on her contract for the bigger home, and losing over half a million yuan in the deposit.
“I’m worried no one wants to buy my 50 square metre apartment anymore,” she says. “I’m not the only one affected by the new policies. I’m just one link in a long chain. If one person scraps the contract, the whole chain is likely to break.”
Local property agents reckon home upgraders like Ji make up around 80 percent of buyers in Beijing this year.
Some developers, too, are concerned about the impact on the market.
Published: 06-04-2017 09:47