From September 30th till October 8th, in just 9 days, 21 cities including all first tier cities have come up with new property curbs.
ShangHai ChengDu and NanChang were the last three cities to jump on the bandwagon. Shanghai plans to increase land supply for commerical housing and affordable housing. The local government promises more oversight of the funding sources for land purchases.
What’s more, the city will tighten mortgage supervision and release authoritiave property market information on a regular basis. As for Chengdu, the down payment ratio has gone up to 30% for the first property and 40% for the second. No loans will be granted for families with more than two properties.
For cities that have released curbs before or at the beginning of the golden week holiday. We are already seeing trasaction volume drop in some cities.
Take Beijing for example, around 216 contracts were signed in that week, compared to 442 signed during the same period last year. Beijing has lifted the down payment ratio for the first and second residential property to 35 and 50%. And 70% for second non-residential properties.
Transaction volume of preowned properties in TianJin dropped 50% in the first week of October versus the same period in September.
NanJing also saw transaction volume more than halve during the golden week holiday. It was the lowest in 5 years.
Wu Han came up with the new policies on October third, total transaction volume from Oct 4th till the 6th was less than a third of the pre-curbs period. So pretty sudden and severe impact on these cities in terms of transaction number.
But will this slow down be temperary? What impact will these curbs have on home prices?
21 Chinese cities have came up with property curbing measures in the past ten days to stop property prices from rising too fast. But the impact on these cities might vary greatly.
Tin Sun, from CBRE research says the new measures will cool down investment focused second tier cities but demand in first tier cities will remain strong.
Analysts believe that more local government will join the group to introduce more tightening measures, but they will not likely to extend to third and fourth tier cities as they are still facing inventory pressure and slowing demand.
“The list of curbing measures will surely expand. I believe there will be more cities joining the list this month or this quarter, to launch their own curbing measures,” said Deng Haozhi, real estate analyst.
What analysts have also mentioned is that supply side reforms such as increasing land supply, converting bad performing commercial properties into residential properties would have bigger impact on first tier cities, because the problem now is– not a lot of new inventories being built while demand keeps rising as more people move to these cities.