The housing market last month slowed despite the start of the spring sales season, as presale projects bore the brunt of credit tightening, the Chinese-language Housing Monthly (住展雜誌) said in a report last week.
An index gauging the property market climate was 37.7 last month, rising 4 points from February to read “yellow-blue” for the 13th consecutive month, the report said, adding that the market failed to benefit from favorable seasonality.
Developers introduced record-high presale projects and newly completed houses for the sales season — from late last month through this month — to try to take advantage of buying interest fueled by excess liquidity and ultra-low interest rates, it said.
That explained why the gauge’s sub-indices on the supply of presale projects, newly completed houses and advertisements picked up, but measures on negotiation room, buying interest and sales rates declined, it added.
“Developers appear to be the biggest victim of the government’s ongoing effort to cool the property market where transactions for existing homes thrive,” Housing Monthly research manager Ho Shih-chang (何世昌) said in the report.
Buyers for presale projects have become cautious after the Ministry of Finance proposed property tax revisions that would impose tax rates of 35 to 45 percent on houses and presale projects resold within five years of purchase.
Transfers of presale projects are currently not subject to property taxes, but are treated like futures contracts since the assets would not be available for a few years.
However, presale projects have grown into a popular short-term investment tool and contribute to property price hikes, driving policymakers to introduce bills to include them as property transactions.
Visitors to presale projects and new houses averaged 40.1 per week, up slightly from 38.6 in February, which is typically lower as it is a shorter month, Ho said.
About 3.1 people or organizations entered purchase agreements each week, increasing by 0.4 from a month earlier, he said.
“The pace of improvement lagged behind expectations by a large margin,” Ho said, adding that investors seem to have fled the market, leaving people with real demand to underpin sales.
There were 4,000 advertisements last month, also lower than previous expectations, as property tax revisions and a second wave of credit controls prompted developers to avoid aggressive marketing strategies, the report said.
The reading on price concessions held resilient because developers generally refused to concede, citing rising land, labor and building material costs, Ho said, adding that the standoff would persist.
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