Sales in China dive on crackdown

HONG KONG: Beijing's credit crackdown targeting homebuyers has had the desired effect, emptying sales rooms during the long Labour Day weekend and dampening housing demand.

"I did not have a single viewing appointment during the whole three-day holiday," said Kent Liu Jing, a property agent working for estate agency Noble Land in Hangzhou. "Even at the height of the global financial crisis in late 2008, I still had one or two calls a day."

Kenneth Pak Kei-yuen, a senior general manager in the Beijing office of Midland Realty, shared the same sentiments. "The cooling measures that came out in the past two weeks made the already quiet weekend even quieter. We are seeing falling transaction levels and rising cancellations," he said.

In Beijing, only seven units in the private residential market were sold during the holiday, according to property news website Soufun.

Sales of both new and existing houses in major mainland cities have plunged up to 80% since April 14, when the central government began rolling out measures aimed at slowing demand and curbing prices.

In the latest measures, the People's Bank of China on Sunday, May 2, ordered banks to increase deposits held in reserve to restrict lending. The reserve requirement ratio was raised 50 basis points to 17% -- the third increase since the beginning of the year.

Earlier measures taken last month included a tightening of restrictions on advance sales of new property developments, an increase in mortgage rates for second-home purchases, banning of loans for third-home purchases and higher minimum down payments for the purchase of second homes.

Sales in other major cities also fell, with Guangzhou, Shenzhen, Shanghai and Hangzhou reporting deals down by 70% to 80% during the long weekend.

Liu said investors and speculators from Wenzhou, Zhejiang province, typically financed their bulk purchases through bank loans and accounted for about 60% to 70% of total sales of luxury residential units in Hangzhou.

"But the ban on mortgages for the purchase of third properties and enforcement of a one-year residency requirement killed the investment market instantly," said Liu, who sells luxury properties in Hangzhou.

"Even those Wenzhou investors who could pay in cash would not qualify to buy as they are not residents of Hangzhou."

On the eve of the holiday, the Beijing city government also announced 12 measures to clamp down on speculators, held responsible for driving prices beyond the affordability threshold of a growing number of buyers.

Agents said the measure that had the most immediate impact on the market was a limit of one new flat purchase per family.

In its April 14 circular, the State Council said the minimum down payment required on the purchases of second homes would be increased from 40% to 50%, and loans to buyers in this segment would be charged at 1.1 times the central bank's benchmark interest rate of 5.31%.

Three days later, it banned mortgages on purchases of a third property and imposed residency requirements on buyers.

Meanwhile, the number of projects offered for sale at the spring property exhibition in Shenzhen held during the Labour Day holiday dropped 70%, according to reports in the mainland media.

Only 14 projects were promoted at the annual fair, compared with 51 last year.

"This was the first time that no Shenzhen project was exhibited at the annual fair. Most developments exhibited were from Huizhou and Dongguan's Changping," said Samuel Wong, a director in the Shenzhen office of Midland. Changping is an hour's drive from Shenzhen.

The number of transactions handled by Midland dropped 70% during the holiday from a year ago, he said.

"Deals we did manage to conclude were for units below 90 sq m and at transaction prices that were down 10% before the implementation of the austerity measures two weeks ago," Wong said.

According to Xinhua, prices for some new projects in Shenzhen have dropped to 24,000 yuan (RM11,300) per sq m from 30,000 yuan before the introduction of the austerity measures.

In Shanghai, some developers did not open their booths on the last day of a property exhibition on Monday, May 3, because of to a sharp fall in visitors, Soufun said.

Prospective buyers could have been attracted to the World Expo instead, agents said.

The Guangzhou Municipal Land Resources and Housing Administration has said it will release daily figures of deal cancellations on its property website in response to rising concerns about the number of buyers walking away from deals.

Ellis Wong, a general manager at Centaline China's Guangzhou branch, said buyers had adopted a wait-and-see attitude on their purchase plans even though sellers were willing to lower their prices by 5%.