China’s southern megacities of Guangzhou and Shenzhen are the latest centers to impose new measures to cool their overheated real-estate markets, including higher mortgage downpayments and home purchase restrictions.
A property boom has given a welcome boost to China’s economy this year, fueling demand for everything from construction materials to furniture, but a growing buying frenzy is adding to worries about ever-rising debt and risks to the banking system.
The new measures are the latest steps to tighten credit flowing into the property sector, as the government tries to balance the need to prevent bubbles while stimulating economic growth.
Prices for new homes in the booming tech center of Shenzhen rose 36.8 percent from a year ago in August, while Guangzhou’s new home prices rose 21.1 percent over that period, data from China’s National Bureau of Statistics showed.
Other cities — including Chengdu, Jinan, Wuhan and Zhengzhou — have already announced new restrictions on property purchases, as the government tries to dampen prices stoked by property speculators in second and third-tier cities across the nation.
The average new home price in 70 major cities climbed an annual 9.2 percent in August, up from 7.9 percent in July, the bureau said.
Nomura analysts said the new measures were expected to help cool frothy prices in the biggest cities and should prevent the market frenzy from spilling over into smaller cities.
“We also believe it unlikely that the latest tightening measures will cause the bubble to burst, sparking a collapse of home prices. We envision a more likely scenario to be a mild retreat or prolonged flattening of home prices in tier-1 cities,” they said in a note on Tuesday.
First-time home buyers in Shenzhen will face minimum downpayments of 30 percent, but deposits for others will be raised to no less than 50 percent, Xinhua news agency quoted a government document as saying.
Downpayments for second-home buyers in Guangdong Province will be increased to no less than 70 percent, Xinhua said without giving further details.
Guangzhou has limited local residents to purchasing a maximum of two properties, according to a statement posted late on Tuesday on the city government’s Web site.
Non-local residents will be allowed to buy one property, if they can prove they have paid appropriate levels of tax or social security.
Separately, local media reported on Tuesday that Suzhou, Jiangsu Province, had unveiled fresh measures, including higher downpayment requirements, to cool the housing market.
Goldman Sachs Group Inc has sounded a warning about the outlook for China’s property market, saying that it sees growing risks across the industry and that any downturn will pose a challenge for metals, especially iron ore and steel.
“We see growing vulnerability in the Chinese property market,” the bank said in a commodities report, citing possible overbuilding, concerns some people now cannot afford homes and rising speculation. “Policy-driven housing booms tend to be followed by slumps due to the payback effect.”
In a note issued on Tuesday that was entitled “China housing: when good news becomes bad news,” the New York-based bank added: “Because housing is a durable good and depreciates very slowly, overbuilding and excess inventory tend to exacerbate the downturn when demand suddenly falls.”
Additional reporting by Bloomberg
RESTRUCTURING: Taichung and Taoyuan profited most from local firms moving back high-end manufacturing amid the US-China decoupling of trade ties, the ministry said The government’s “Invest in Taiwan” initiative might this year see NT$627.1 billion (US$21.7 billion) of investment pledges realized, with several firms raising stakes and two dropouts due to customer losses, Minister of Economic Affairs (MOEA) Wang Mei-hua (王美花) said yesterday. Wang made the statement at the monthly meeting of the Third Wednesday Club, a local trade group featuring the top 100 firms of each business sector. Since early last year, the government has launched three programs intended to help local companies grapple with US-China trade rows and the COVID-19 pandemic, mainly through moving production lines back to Taiwan. Thus far, the ministry
JOBS AT RISK? Most Cathay Dragon routes are to be operated by Cathay Pacific or a subsidiary, but it was unclear how Taiwanese workers would be affected Cathay Pacific Airways Ltd (國泰航空) yesterday said it is planning new flight services for Taiwan as it announced a corporate restructuring that included the shutdown of its regional subsidiary, Cathay Dragon (國泰港龍), and could lead to job cuts in Taiwan. Cathay Pacific said the shutdown means that the one round-trip service between Taichung and Hong Kong per day and seven round-trip services between Kaohsiung and Hong Kong operated by Cathay Dragon prior to the COVID-19 pandemic would be terminated. “The parent company is planning a new schedule between Taiwan and Hong Kong,” Cathay Pacific assistant manager for corporate communications Moses Hou (侯恩錫)
OVERHEATED MARKET?: The gauge would be designed to provide more reliable information than private-sector data, and help improve policymaking, the council said The National Development Council (NDC) is considering creating a business climate index on Taiwan’s property market, allowing policymakers to better monitor market movements and intervene if necessary, NDC Minister Kung Ming-hsin (龔明鑫) said yesterday. Kung made the remarks at a meeting of the legislature’s Economic Committee where lawmakers from across party lines voiced concerns about housing price hikes driven by capital repatriation. Kung said that the council is assessing the possibility of creating an index designed to provide more accountable and transparent information than data provided by private-sector market analysts, and could help improve policymaking. The council would compile a report on
STOCK MARKETS TAIEX closes slightly higher The TAIEX closed slightly higher yesterday as market sentiment remained cautious over the Nov. 3 US presidential election. Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) was again the anchor stabilizing the broader market, preventing the main board from falling into negative territory at the end of the session, dealers said. The TAIEX closed up 14.88 points, or 0.12 percent, at 12,877.25, on turnover of NT$167.982 billion (US$5.81 billion). TSMC, the most heavily weighted stock on the local market, rose 0.44 percent after fluctuating between NT$451 and NT$456. The semiconductor subindex and the bellwether electronics sector