Source : Straits Times - 17 Oct 2008
BEIJING: For the past year, Ms Chang Feng, an English lecturer at a Beijing university, has been looking to buy a new apartment - an upgrade from her current flat and one near a good school for her son starting primary school in 2010.
She had shortlisted some flats but with property prices here sliding in the wake of the global credit crunch, she is now just going to sit and wait for a better buy.
‘I’ll hold off. I think the market is going to fall some more,’ said the 37-year old.
The ‘wait and see’ behaviour of would-be buyers like her has stalled China’s property market, raising fears of collapsing prices and a real estate meltdown similar to the one that put the United States in recession.
While China has escaped the worst of the global financial crisis so far, there is creeping worry here and a chorus of calls from industry players for Beijing to step in to ’save’ the housing market.
Housing sales in major Chinese cities last month were down 64 per cent year on year, with prices falling by 4 per cent from August, according to Goldman Sachs. The fall comes just one year after the nation saw the highest price rises in the world in that category.
By the middle of this year it was evident that the slowdown was for real: The house price index for 70 major cities rose 7 per cent in July from a year earlier, the lowest increase yet this year, according to government statistics.
When adjusted for inflation, house prices rose by a mere 0.7 per cent over the same period. Some developers had begun to offer rebates of up to 10 per cent.
Unwilling to wait until Beijing moves, many jittery local governments have jumped in to resuscitate property sales.
The Guangzhou-based Nanfang Daily newspaper yesterday reported that some 17 municipal governments had tried to boost sales by introducing measures like lower transaction levies, direct subsidies and tax incentives.
In Shanghai, the authorities raised the ceiling on mortgage lending to households by 20 per cent to as much as 600,000 yuan (S$130,000) from 500,000 yuan on Tuesday. That’s typically enough to buy only a small two-bedroom flat in the more remote parts of the suburbs.
The Nanjing city government is offering a subsidy of 0.5 to 1 per cent of the purchase price to house buyers.
In Hangzhou, the municipal government rolled out a package of 24 measures on Monday, including subsidies for property transaction taxes. To ease the cash-flow pressure weighing on developers, the authorities are giving them more time to pay for land they use and to complete their projects.
Any slump in the property market hits local governments before it bites Beijing, noted economist Zhang Bin, of the Chinese Academy of Social Sciences.
‘Municipal governments take the state of the property market very seriously because it’s a very important part of the local economy - involving land, banking and providing jobs,’ he said.
Those governments get a large part of their revenue from selling land to developers and through collecting taxes from real estate transactions, he explained.
But recent sales in cities already offering incentives remained slow, suggesting that the stimulus packages had failed to change consumers’ wait and see stance, Goldman Sachs said in a research note.
The central government should jump in with more drastic measures like a further interest rate cut before the real estate market woes spread to other key industries, said Ms Wang Xin Xin, sales manager at a West Beijing condominium project built by the listed Gemdale Corporation, one of China’s largest developers.
‘If this situation continues, prices will collapse because buyers are so influenced by the bad news in the press and will hold out for lower prices. Already, the few who are still buying ask us upfront for big discounts,’ said Ms Wang, whose sales volume dipped by 40 per cent last month.
Not all agree with Ms Wang. Indeed, some think that too many measures in rapid succession may signal panic, which could only damp sentiment further.
Says Mr Kevin Tu, a senior manager with DTZ Beijing: ‘These interventionist measures just disrupt the normal behaviour of the market, which I think will just readjust and be okay over the longer term.’
JITTERS ABOUT MARKET
‘If this situation continues, prices will collapse because buyers are so influenced by the bad news in the press and will hold out for lower prices.’ - Ms Wang Xin Xin, sales manager at a West Beijing condominium project
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