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China Property

Shanghai taking steps to stop housing market from overheating

Developers required to ensure at least 70 per cent of units built in urban area are no bigger than 100 square metres

PUBLISHED : Tuesday, 23 February, 2016, 8:41pm
UPDATED : Tuesday, 23 February, 2016, 9:48pm

Shanghai officials have issued a new policy aimed at forcing developers to increase the supply of small and mid-sized units in an effort to prevent the city’s housing market from overheating, with analysts expecting even stricter policies to be introduced to rein in the market.

The city government said on Tuesday that developers would be required to ensure that at least 70 per cent of units built in Shanghai’s urban area were no bigger than 100 square metres, with the ratio rising to 80 per cent around subway stations and falling to 60 per cent in suburban areas.

Shanghai’s home market has shown signs of “panic buying”, with a new project selling out in one day.

Developer Shui On Land said on Monday it had sold all 352 residential units at the newly launched Rui Hong Xin Cheng Phase 6 in Shanghai’s Hong Kou district within a day, with the value of sales totalling 3.5 billion yuan, and average selling prices hitting 80,000 yuan per square metre or 10 million yuan per unit.

According to data from real estate consultancy Tospur, 597 units valued at over 10 million yuan were sold in Shanghai last year, compared with an average of 120 units such from 2010 to 2014.

It seems out of control, the current policy can not stop increasing market enthusiasm
Gong Min, Shanghai Centaline Property Consultants

“It’s so crazy,” said a woman who had just bought a new home at a development in Shanghai Yuqiao, a suburban area in the city’s Pudong district.

She said she bought at 53,000 yuan (HK$63,082) per square metre on Sunday and now, just two days later, the asking price was 56,000 yuan per square metre.

Analysts say they expect the city government will implement stricter policies soon in a bid to cool the market.

“It is highly possible the government will further tighten the buying restrictions,” Gong Min, a senior research manager with Shanghai Centaline Property Consultants, said. “It seems out of control, the current policy can not stop increasing market enthusiasm.”

She said recent policy easing had made home buyers believe home prices would continue to rise, which had exacerbated the market panic.

The central government has issued a number of policies in past few months aimed at boosting home sales in smaller cities, including cutting property tax and lowering down payments.

Most of the easing does not apply to top-tier cities such as Shanghai, which is one of only five mainland cities to still enforce strict home purchase restrictions limiting non-permanent residents to the purchase of just one flat.

Unlike smaller cities which are facing increasing inventory pressure from a glut of supply, home prices have surged in leading cities like Shenzhen and Shanghai due to their strong economies and population inflows.

At the beginning of the year, Shanghai officials recommitted to strict enforcement of the restrictions, which have failed to stop home prices from skyrocketing.

Shanghai saw home prices rise 15 per cent year on year to a record 37,062 yuan per square metre in January.

“Given the weakened economy, volatile stock market and the historic low interest rate, high-net-worth individuals have rushed to the housing market, ” Tospur research director Zhang Hongwei said.

Gong said supply was short in Shanghai’s main urban area and she expected prices in the city would continue to grow rapidly this year.

China Real Estate Information Corp estimates Shanghai’s inventory of commercial housing dropped to an equivalent of only 3.7 months of sales by the end of January, the lowest on the mainland.

Zhang said the latest policy would help guarantee supply for first-time home buyers for their own use but long-term supply problem would not be easy to solve.

Shenzhen’s city government said this month it was studying further tightening measures, including extending the home purchase threshold regarding social security contributions by non-permanent resident to three years, from the current one year.

Shenzhen’s home prices jumped nearly 50 per cent last year.

Gong said she expected Shanghai would issue a similar policy soon.

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