Luxury projects stalled in bid to control prices
The Beijing and Shanghai governments are stalling approvals of big-ticket house sales as they try to push down average sale prices to give the impression that efforts to cool the property market are working.
'They [the two local governments] have added administrative barriers to sales of luxury residential projects. Only a few high-end projects now obtain pre-sale consent. The governments are trying to decrease the release of luxury properties in order to create a false appearance that property prices of new projects are falling,' said an analyst who wanted to remain anonymous.
'The demand for luxury properties is strong. The governments decided to use administrative means to control average price levels. It could also avoid the embarrassment of having to report record-breaking transactions by limiting new releases,' he said. 'The average price of new projects will drop if most of the projects on the market are mass residential. Then the governments could 'buy time' to let their cooling measures take effect.'
Property agents said the district governments in Shanghai were previously in charge of pre-sale approvals for all residential projects. But in the last two months, projects with homes priced at more than 30,000 yuan per square metre (HK$3,250 per sq ft) had to go through the Shanghai municipal government.
Singapore developer Keppel Land applied for pre-sale consents for its luxury residential project in Shanghai, the third phase of 8 Park Avenue, two months ago. It has yet to obtain consent, although agents said it usually took a month.
A spokesman for Keppel Land did not directly comment on the issue.
One property agent said: 'The project is located in Jingan district and close to West Nanjing Road. It is a prime location.'
Property prices of the third phase of 8 Park Avenue could reach about 70,000 yuan per square metre if it was launched in the market now, he predicted.
The same thing is happening in Beijing. The Beijing News reported on Friday that only a few high-end developments, such as Yu Tang Shan and Beijing ONE, had secured pre-sale consents since September 29.
The central government has adopted various measures to curb the growth in property prices. On October 19, the People's Bank of China raised the benchmark interest rate by 25 basis points. Banks have tightened conditions and costs, and now developers are finding it difficult to secure loans.
In Nanjing the municipal government has begun to monitor prices and impose restrictions on the sale of new projects. It announced on October 26 that developers could not raise their asking prices for three months after securing pre-sale approvals. They also need to get approval for raising property prices from the Bureau three months later.
Setting selling prices in Shanghai is also no longer the decision of developers alone, a property agent said. 'The government would advise the developers to lower the asking prices of the new phase of their projects if there is a big price difference between the new phase and the previous phases,' he said.'The governments are becoming involved in setting selling prices. It seems that we have returned to a planned economy from a market economy.'
Dickson Wong Hung, the chief executive for property agency Centaline Property on the mainland, said the tightening in the market would continue until the end of next year.
'Developers have begun to cut the asking prices of new projects located in suburban Beijing. I think property prices will drop 10 per cent in the coming two months.'
False economy
Approval for big-ticket home sales is stalled to suggest prices are falling
The Shanghai government, not district authorities, now vets sales of flats costing this much or more, per square foot, in Hong Kong dollars: $3,250
