The housing market might be bogged down, but a tough local real estate policy that took effect last month has sparked chaotic competition among house buyers.

Beijing Homelink Real Estate Brokerage, the biggest property agency in the capital, is complaining that a policy issued on April 30 - which bans families from buying more than one additional home in the capital and non-locals from buying an extra home unless they have worked in Beijing for a year - is hurting their business.

The real estate company runs 600 outlets in Beijing and has acquired a market share of almost 30 percent of the total second-hand house market.

However, Homelink's transaction volume of secondhand houses shrank by as much as 60 percent in May from one month earlier, according to spokeswoman Zhang Yue.

"We haven't closed any stores yet because shutting them down would be expensive," Zhang said, in response to reports that Homelink had closed several Beijing outlets.

"When we rent a shop, we have to pay a large deposit. If we quit, we lose that money. Additionally, we would need to pay to lay off staff."

Homelink opened 120 new outlets in the capital in 2009, but expansion was now on the slow - only 30 new stores have started business this year.

The transaction volume of second-hand houses in Beijing was around 6,000 in May, a drop of 80 percent from April, according to Homelink statistics. It set the average price at 18,673 yuan per sq m, down 8 percent from April's 20,154 yuan per sq m.

The housing situation has also had an effect on international real estate agencies trying to break into the industry.

Qian Xinwei, assistant manager of San Francisco-based property franchise Coldwell Banker's China branch, said the policy does influence their strategy. "We do not have a presence in Beijing but we expect an outlet in the capital in the second half of this year, or possibly next year," Qian said. "Actually, I am not certain when."

Coldwell Banker now offers services for pre-owned homes from 102 outlets in Shanghai, Chongqing and Zhejiang. That figure is hoped to rise across China to 250 by 2011.

Zhang Dawei, director of the research department at Centaline Property Agency Ltd, said his company has lost more than half its housing brokerage business.

"I predict the icy period will last for up to one year," Zhang said. "Centaline has 150 outlets in Beijing and we have no plan to close any of them or dismiss employees, at least by the end of this year." The reasons for property agencies not scaling down their shop numbers might be because they will lean on other channels of support.

Zhang said Centaline also offers services for helping mainland investors become Hong Kong residents by investing in Hong Kong property projects.

"Though the homes don't sell well, the immigration programs are quite a temptation," he said.

Home rentals are doing well though, with Homelink's business climbing 10 percent.

"Most people have stopped the trade of properties, which means there are more rental homes on the market," Zhang said.

Li Jin, a house broker in Beijing who works for 5j5j Property Agency, said his store only sold three apartments in May, down from a dozen in April.

"My salary has been cut in half since the policy came out but I still don't want to give up. While the policy has scared investors away, the public still needs homes."

Li said he earned almost 200,000 yuan in 2009, but doesn't expect so much this year. "My wife and I are expecting a baby in July. I really hope the situation will improve soon."