A year after cooling property measures took effect, market sees decline in sales and prices

2018-03-19 16:42Global Times Editor: Li Yan ECNS App Download

It has been almost a year since the Beijing municipal authorities announced tightened rules to rein in the country's over-sizzling property market. Industry analysts say that the new detailed measures, such as raising down payments for second homes and tightened credit lending, represent one of the most stringent grips on the real estate market to date. So what does China's property market look like now one year after the rules took effect?

It has been almost one month since the Spring Festival holidays ended, yet real estate dealer Zhu Ming (pseudonym) has been unable to sell a single apartment in Beijing's Dongcheng district.

The 20-something man's grappling with lukewarm housing sales in the domestic market is in sharp contrast to his big ambition set one year ago, when he became determined to start a career at a major property agency and gradually capitalize on the country's overheating real estate market.

"[The period after the Spring Festival holidays] has traditionally been a robust sales season. I still remember the scenario prior to March 17 last year, when buyers were flocking to us and anxiously looking for new homes… It was a seller's market and selling an apartment at that time was as easy as selling Chinese cabbage," Zhu told the Global Times on Thursday.

Indeed, since that date in 2017, when Beijing municipal authorities announced tightened rules, such as raising the down payment for second homes from 50 percent to 60 percent and suspending housing loans with a maturity rate of 25 years or more, the property market has indisputably been cooling down.

Recalling the impact of the rules, Zhu said that "as soon as the new policy came out, the number of home seekers plunged by two thirds between April and June, with sellers at that time being reluctant to compromise much on prices."

Then, in July, browsing numbers bounced back a little amid a freefall in housing prices, but the housing trade volume later tipped and now stands at an all-time low, Zhu added.

Data from research agencies also provide evidence of the country's cooling housing market.

In 2017, a total of 136,237 homes changed hands in Beijing, down 50 percent year-on-year, touching the lowest point since 2015, according to a report property agency Centaline sent to the Global Times on Thursday.

Meanwhile, new home sales have plunged by 48.7 percent to 23,388 and the average second-hand home price has declined by 15 percent so far compared with the price recorded in April of last year, the report noted.

Against this backdrop, the waning property market has somewhat derailed the ambitions of real estate dealers like Zhu.

His income, which was initially comprised of a basic salary plus commissions based on housing sales, has continuously "dropped over the last several consecutive months due to lackluster transactions."

Making matters worse, such rapid income reduction has prompted many of his colleagues to quit the industry and find alternative job opportunities, Zhu said.

A buyer's market

Industry insiders pointed out that because of the downward trend in the nation's property market, most buyers are now adopting a "wait-and-see" attitude.

A Beijing-based white-collar worker surnamed Zhang, along with her husband, has been browsing houses for almost a year, but she has not yet made a concrete decision.

"The Beijing government has sent a clear signal that it will maintain strict control over the local property market by tightening credit and other pinpoint policy adjustments, so we're not in a hurry to purchase houses and are sitting on the sidelines waiting for bigger bargains and better locations and house types," Zhang told the Global Times over the weekend.

Zhang said that she now feels buyers like her are becoming the "sweet pastry" of China's property market. "It is now a buyer's market, and we have more ammunition in negotiating prices with housing dealers and sellers," she stressed.

For example, during last year's peak sales time, her property agency insisted that her brokerage fees be 2.7 percent of the total transaction volume, but later on, the agency decided to compromise and offer her a 2 percent fee instead, she added.

Another Beijing-based white-collar worker surnamed Chen shared Zhang's view and described himself as "a beneficiary" of the buyers' market.

In December, Chen bought a 70-square-meter apartment in Beijing's Shijingshan district for about 3.5 million yuan ($552,755) after the seller agreed to reduce the price by about 500,000 yuan.

"The seller owns several apartments in the area, but due to expectations of continuous price declines, he was looking to dump his assets and invest in other profitable businesses. So after negotiation, he reduced the asking price," Chen told the Global Times.

More balanced supply

Zhang Dawei, chief analyst at Centaline, told the Global Times over the weekend that after March 17 last year, Beijing issued more than 30 measures in the six months that followed in order to rein in the municipality's housing market, "a record high in terms of the policy's density."

The new rules have lifted up the purchasing threshold, especially lending curbs, which in turn has priced out potential buyers and lowered leverage ratios and financial risks, Zhang said.

For example, now, buyers usually borrow housing loans from banks at an average interest rate of between 5.1 percent and 5.4 percent, a dealer based in Beijing's Chaoyang district, who only gave her surname as Zheng, told the Global Times. That compares with an average rate of between 4.16 and 4.41 percent recorded last year.

"So far, most buyers who have remained in the market are in rigid demand… and this will contribute to sound and balanced development in the long term," Zhang said.

Industry insiders predict that in the future, China's property sector will continue to cool down, especially once a total of 250,000 new homes jointly owned with the government enter the market. The new houses enable residents to buy homes at less than half the market price and will be realized in the next five years.

Echoing the importance of the tightened housing policy, Chinese Premier Li Keqiang said in a Government Work Report delivered to the opening meeting of the ongoing 13th National People's Congress that "houses are built to live in, not for speculation."


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