Economy

Home prices expected to fall amid govt measures

(Xinhua)
Updated: 2010-04-29 14:53

BEIJING: Home buyers who can afford a one-off payment could save 2,000 yuan ($293) per square meter compared to a typical installment plan, a saleswoman surnamed Yang told Xinhua on Tuesday.

"You can save about 80,000 yuan for a one-bedroom flat of 40 square meters," Yang said.

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This is equivalent to an 8-percent-off discount for a new flat located in Tongzhou District, outside the fifth eastern ring road in Beijing.

Not only in Beijing, real estate developers in Nanjing, capital of eastern Jiangsu Province, offer discount of 200 yuan per sq m for home buyers who afford one-off payment.

Analysts said this has shown that a string of government measures introduced recently to cool down the real estate market began to impact the market. They expected the measures could give a hard strike on real estate speculation and drag down the home prices.

Soaring home price

Chinese home buyers have not seen such attractive deals as payment discount in a year, since the property prices began to rapidly climb in April 2009.

Beijing's property market continued to heat up last month with home prices in the capital city surging 12.3 percent from a year earlier, official figures show.

Home prices in Tongzhou have doubled to more than 20,000 yuan per square meter in the past year, driving up average property prices in the capital city.

"But good deals have recently begun to appear in Beijing, Shanghai, Nanjing and other cities, showing some property developers' eagerness to speed up sales and get investment back, as they fear a home price drop due to recent tightening measures," said Chen Sheng, vice president of the China Index Academy, a private-sector research institute specializing in real estate.

However, providing a one-off payment of about 1 million yuan, or even installment payments, for a one-bedroom flat in the capital city is beyond most college graduates's capacity, despite the 8-percent-off discount.

Many college graduates can only get a monthly salary of around 4,000 yuan in Beijing.

Beijing was not the only city with a double-digit monthly home price increase last month.

Home prices in China's 70 large and medium-sized cities including Beijing, Shanghai and Guangzhou surged 11.7 percent in March from a year earlier, the biggest monthly increase in nearly five years, the National Bureau of Statistics said on April 14.

Draconian moves

This figure exacerbated the public's worries and discontentment, even though the government has moved recently to cool the overheated property market.

Property speculation coupled with ballooning lending last year, has continued to lift prices.

But according to Chen, property prices may well fall in the big cities this year. "Gradually the government polices will influence the market," he said.

The Ministry of Land and Resources announced on April 15 it planned to increase the land supply available for residential property building this year to 180,000 hectares from 76,461 hectares in 2009.

"This move hit the mark, as it will help reduce land costs and curb soaring home prices," Chen said.

Governmental authorities have also introduced new restrictions on loans for third home purchases and raised minimum down payments for second home purchases to try to decrease property speculation.

Lian Ping, chief economist of the Bank of Communications, China's fifth largest lender, told Xinhua that the government's timely steps could stifle the growth of asset bubbles.

Caution detected but more dfforts needed

Potential home buyers and investors have already become more cautious in making decisions after a string of government measures were recently implemented.

Official data revealed that 738 existing homes were traded in Beijing between April 17 and 21, 13.9 percent lower from the amount a week earlier.

Chen Ying, a 25-year-old college graduate in east China's Jiangsu province, said she planned to buy a small apartment with financial help from her parents in early April, but now she is hesitant.

"Some property developers in Nanjing are offering discounts. But my friends feel like me that government efforts to cool the property sector may affect prices, so it's better to be conservative for now," said Chen Ying.

However, many analysts hold that more measures are needed, including building more affordable homes for low-income city dwellers, collecting property tax from speculative home buyers.