Shenzhen housing market gets chilling effect as policy curbs flush out speculative buyers

By Pearl Liu / | August 5, 2020 10:04 AM SGT
China's housing market is blowing hot and cold in a struggling economy, where property investors trying to catch a post-pandemic rebound have been knocked back by local policy disciplinarians.
Nowhere is that more evident than the sudden squeeze this month in Shenzhen, the Silicon Valley of China and a speculative hotbed in the southern province of Guangdong that borders Hong Kong.
Some homeowners have started slashing their asking price by about 5 to 7 per cent after local authorities introduced harsh measures to clamp down on runaway prices, according to property listings. Some 1,019 units out of 30,000 existing homes listed on Centaline Property's website are now offering discounts to entice buyers.
They include a two-bedroom unit measuring 60 square metre in Fudian district selling at 4.1 million yuan (US$585,000) after a 4.7 per cent discount, and 371-sq m villa in Nanshan district that is going for 65 million yuan after a 7 per cent knockdown.
The discounting follows a decision by the local government on July 15 to impose extra residency and tax requirements on buyers to flush out speculative elements that gave Shenzhen the unwanted distinction of being the most expensive housing market in mainland China.
"The measures rained on the parade," said Fion He, director of the research centre at Midland Realty. "Some owners are willing to lower their asking prices because many buyers are now sidelined by the new curbs."
Shenzhen's home prices jumped 11.4 per cent in the first half this year in spite of the economic slowdown, compared with a flattish trend in neighbouring Guangzhou, according to data compiled by the Chinese Academy of Social Sciences. Shanghai recorded a 4.7 per cent gain while Beijing saw a 2.8 per cent increase.
Under the new rules, residents with hukou in the city will only be allowed to buy a home if they have held the so-called local household registration paper for more than three years, according to the Housing and Construction Bureau. They are also required to show proof of their income tax or social security payment history in the city for three consecutive years.
The policy curbs have had an immediate impact on the market. Existing home sales have fallen to 222 units per day between July 16 and 22, compared with the daily average of 450 units before the tightening measures.
Shenzhen's residential market is springing back to life as China's economy rebounded last quarter. The coronavirus outbreak from January led to unprecedented lockdowns that froze factories and triggered a history slump not seen since 1976.
More than 60,700 homes of new and existing homes changed hands in Shenzhen in the first half, an increase of more than 25 per cent from a year earlier, according to Midland.
Midland Realty has dialled down its market forecast for the second half to 50,000 from 65,000 units, He said. Prices may rise by about 2 per cent, she predicts.
"We have seen enquiries or visits by potential homebuyers shrinking by more than half because many prospects have suddenly lost their qualifications to buy," she added. "Others have decided to wait and see whether prices will see further correction."
Crystal Tan, a trader with an international oil company based in Dubai is among those were suddenly squeezed out of the market by the new curbs.
"Such bad luck, I have done house-hunting for more than three months with money all prepared," she said. "Now, I just cannot buy. All I can do is hope that the measures will bring the insanely high prices back to normal levels."
Home purchase for investment, rather than for own dwelling, is likely to drop and drag prices down with it in the second half of this year," said Zhang Dawei, a Beijing-based analyst with property agency Centaline. "If the inflow of population continues and supply of homes cannot catch up with it, the cooling measures may lose its effect soon."
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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