Economy

Real estate market cools down in Shanghai on government moves

By Shang Ban (China Daily)
Updated: 2010-04-17 09:29

Large Medium Small

SHANGHAI - The latest central government measures to cool the property market have caused many prospective buyers in China's business hub to adopt a wait-and-see attitude.

Although the measures announced late on Thursday evening were within the expectations of many analysts, they point to the deep concern of economic planners about public objections to escalating property prices.

"The government has sent a message to the market that it is serious about clamping down on excessive speculation," said Xue Jianxiong, a senior analyst at E-House China, a property agent.

Chief among those measures was the directive to require a minimum 50 percent down payment for mortgages on second homes, up from 40 percent. A minimum down payment of 30 percent is stipulated for first-time buyers of apartments larger than 90 square meters.

"Those were the toughest corrective measures to combat overheating (in the property sector) I have ever seen," Xue said. If they don't work, "we can expect to see even tougher measures in a few months time", he added.

Rumors of impending government action began circulating on Monday. Since then, "we have seen a sharp decline in sales with buyers and speculators waiting for the news to break", said Liao Tao, a manager at Great Town Real Estate.

"We are still trying to assess the impact of the latest measures before advising our clients whether to buy," he said.

But Xue and other property agents said they remain skeptical about the effectiveness of monetary measures in combating speculation. As long as the speculators, including hot money from abroad, believe that the return can more than cover the increased cost, they will continue to pour money into the marketplace, they said.

Property agents said that the bullish trend has been sustained by brisk economic growth, low inflation and flat interest rates. What's more, many overseas investors are banking on the strength of the renminbi as they pump money into mainland properties.

The government has been talking about the need to moderate the increase in property prices since the end of last year.