The southern Chinese city of Zhuhai has introduced restrictions on housing purchases in a sign of the government’s resolve to rein in the property market.
The move on Tuesday came even though prices have started to decline across much of the country.
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Similar restrictions have been rolled out in other big cities since last year, including limits on the number of units households can buy, curbs on purchases by non-residents and caps on the amount developers can charge for apartments.
But a big drop in sales volumes and recent price falls in leading markets had led many to assume Beijing would start to ease restrictions.
Shares in most leading Hong Kong-listed Chinese property developers rebounded by between 30 and 80 per cent in the fortnight to last Friday on expectations of imminent easing, although most were still down by more than a third since the start of the year.
Shares in listed developers such as Evergrande, Longfor and China Vanke fell on Tuesday in Hong Kong and Shanghai on news of the Zhuhai restrictions and reports in Chinese media that some large developers were offering big discounts on developments.
Many in the sector fear such discounts could trigger a wave of price cuts amid weak demand just as a large number of new apartments is expected to come to market across the country.
Adding to those fears, data from the China Real Estate Index System released on Tuesday showed average residential property prices across 100 leading cities in China fell 0.23 per cent in October from the previous month, the biggest decline so far this year.
Average prices were still up 5.21 per cent on the same month a year earlier, but this was a slower increase than the 6.16 per cent rise in September.
For most Chinese citizens the rapid price rises of the past few years have put apartments in big cities far out of their reach and the government wants to bring prices down gradually to make them more affordable.
But because of the importance of real estate to the wider economy – housing construction is estimated to make up one quarter of investment and 10 per cent of the country’s gross domestic product – Beijing is wary of triggering steep price declines.
On Saturday, Wen Jiabao, the Chinese premier, said Beijing was looking for a “reasonable correction” in prices and would resolutely continue its property tightening strategy while forcing local governments to implement existing housing purchase restrictions.
Zhuhai, an industrial city in Guangdong province, announced on Tuesday that people who had not paid taxes or social insurance in the city for more than a year could not buy apartments there, while local families were limited to buying one home unit each.
It also imposed a cap on home prices of Rmb11,285 per sq metre for the rest of the year. Any developer asking for higher prices would not be given permits to sell their developments.
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China imposes curbs on buying property
Chinese property buyers get BMW thrown in
The sudden downturn in China’s property market is bad news for many global companies, but luxury German carmakers stand to benefit, at least in one city.
In Wenzhou, where house prices have fallen sharply, a real estate developer said that from Wednesday it would throw in the keys to a BMW with each apartment at a new residential complex for the first 150 buyers.
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The deal is a sign of the desperation felt by developers in China’s once-booming property market, which has been pounded by government measures aimed at heading off a bubble. The slowdown is a matter of international concern, with Chinese house construction driving demand for commodities and propping up growth in the sputtering global economy.
Chinese developers have been reluctant to cut prices as transactions have slowed this year, but some are finally capitulating after dreadful sales in October. Others, afraid of the stigma of slashing prices, are offering giveaways such as extra garden plots, Louis Vuitton handbags, cruise vacations and now cars.
“Whoever signs a contract and makes the downpayment will be able to drive away in a BMW,” said the sales assistant at Central Mansions, a cluster of brown towers with 868 apartments that have just come on to the Wenzhou market.
“No, it doesn’t mean that sales are bad. It’s just that we’re trying to attract customers,” she said.
Home to legions of entrepreneurs and speculators, Wenzhou’s economy soared when China was flush with cash. But it has been hit harder than most cities by the government’s shift to a much tighter monetary policy to control inflation, as well as the property clampdown.
Wenzhou’s housing sector is now the weakest in the country, with prices falling 1.4 per cent in September month on month. Its smaller firms have suffered from a lack of bank credit, triggering dozens of bankruptcies and prompting the government to
But while Wenzhou is an extreme case of the stress in China’s property market, it is certainly not alone. Housing prices have started to fall nationwide, according to the China Real Estate Index System.
That has been tough to digest for many Chinese who had come to believe that house values could only rise. When several developers in Shanghai cut their asking prices last month, homeowners protested, ransacking showrooms and demanding refunds.
Fearing similar fallout, many developers are trying to entice buyers with special deals instead of discounts. The BMWs in Wenzhou cost Rmb300,000 locally, equivalent to about 10 per cent of the price for an apartment, the sales assistant said.
Xiaoyunli No. 8, a development in Beijing that has sent workers to leaflet cars at busy intersections, said there would be no discount and no car for buyers.
“But you’ll get a deal and it will be no problem for it to amount to the tens of thousands. It will be like giving you a car,” the receptionist said.
