Money

'Government holds key to unlock prices'

By Wu Wencong (China Daily)
Updated: 2010-06-25 08:51

Property prices and trading volumes in Beijing might have fallen - following the introduction of a tough new policy on April 30 - but insiders say Beijing buyers' interest in buying new homes has not diminished.

Visitors to a housing exhibition find out more about a property project. [Zou Hong / China Daily]

The new policy, recognized as the strictest in the city's history, prohibits families from buying more than one additional home. Non-locals are not allowed to buy an additional home unless they have worked in Beijing for a year.

But Hou Zhenyu, director of the group purchase center of funlon.com, the biggest membership property-purchasing club in China, said: "People who want to buy additional homes will find their ways. Where there is a rule, there is a countermeasure."

The club organizes visits to different housing projects twice a month, both within and outside Beijing. Each visit consists of 50 potential buyers.

Hou said the club's business has not been reduced by the tough new rules.

The membership has maintained a stable growth of 30,000 per year since 2007, plus 10,000 people who show interest in joining the club every month.

"Bookings are already full for group visits in July and August," Hou said.

However, he admitted trading volumes had dropped dramatically.

"Last year, about 10 contracts were signed for every group visit, 20 per month; but from January this year till now, only nine deals have been closed," Hou said.

On Wednesday, People's Bank of China released the second quarter's report of Beijing citizens' demand for buying new homes, emphasizing the public expects property prices to drop.

About one third think prices will drop next year. The percentage of people who expect them to rise is 22.5 percent.

Hou said he didn't think property prices would drop continuously in the future.

"Because land prices have not dropped together with housing prices."

He said real-estate developers would have to sell the homes at a loss if housing prices dropped too low.

"For example, say they bought the land for 20,000 yuan per sq m from the government and sold the homes at 40,000 yuan per sq m. If the price dropped to less than 30,000 yuan, they would never cover their other costs," Hou said.

"The key to property prices lies with the government, not the real-estate developers."