Shanghai relaxes more rules on property sector

PUBLISHED : Tuesday, 30 December, 2008, 12:00am
UPDATED : Tuesday, 30 December, 2008, 12:00am
 

Oversupply puts pressure on prices, analysts say

Despite the Shanghai government's efforts to revive the property market by easing rules for people buying a second home, prices remain weak because of oversupply, property consultants say.

They said the Shanghai government's latest move, announced at the weekend, sent a positive signal to the market but warned that a substantial rise in prices was unlikely until there was a full-fledged economic recovery.

The move failed to boost the share prices of major developers with a strong presence in Shanghai. Shares of Shimao Property Holdings remained unchanged at HK$5.52 and Shui On Land closed at HK$2.44, also unchanged from last Wednesday.

'The stimulus measures have had a psychological impact on the market, but we still need to wait and see the effect on both transactions and prices,' said Clement Luk, the director of Centaline China's Shanghai office.

The low to medium-priced sector would primarily benefit from the new rules because the preferential terms were aimed at flats worth between 980,000 yuan (HK$1.11 million) and 2.45 million yuan, he said.

'We have seen increasing sales of units in that price range, as the central government is encouraging banks to relax lending for genuine end-users to support domestic purchases of affordable homes,' said Mr Luk.

The Shanghai municipal government announced on Sunday it was introducing new measures allowing buyers of first and second homes to enjoy the same preferential mortgage terms.

The new rules will cut transaction cost for purchasers of second homes because their mortgage rate will fall from 1.1 times the benchmark rate to 0.7 times - the same as for first-time buyers.

Shanghai's Housing Fund programme will lend up to 600,000 yuan, up from 200,000 yuan currently, for applicants with two or more family members.

The property deed tax will fall to 1 per cent from 1.5 per cent for units below 90 square metres.

Shanghai is the first city to introduce preferential terms to boost the ailing property market. Its move comes less than a week after the State Council announced it was cutting property transaction taxes and encouraged banks to lend more to developers for acquisitions.

Mr Luk expects transaction volumes for second-hand homes to hover at about 10,000 deals this month, the same as last month.

Prices in the secondary market have tumbled by as much as 30 per cent, particularly for luxury flats held by overseas buyers who are desperate to cash out of their properties because of the uncertain market, he said.

Alva To Yu-hung, the North Asia head of the consultancy department at DTZ, said: 'Despite the introduction of stimulus measures, property prices are still under pressure as developers will continue to discount prices to clear stockpiles.'

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