China’s property market has surged in recent years. After prices jumped 25 per cent in 2009 alone, the central government imposed austerity measures, including lending curbs, higher mortgage rates and restrictions on the number of homes each family can buy.
Home sales plunge into deep freeze
Tough new cooling measures send chill through the mainland market for second-hand flats
A week after most mainland cities announced details of the latest round of State Council-ordered cooling measures, home sales in the secondary market across the country plunged as much as 90 per cent.
Sales of second-hand homes in Shenzhen tumbled 89 per cent for the week ended April 7 from the previous week, according to the city's Urban Planning Land and Resources Commission. Beijing's weekly transactions of second-hand homes fell 80 per cent, mainland property agent Homelink announced.
Buying demand in second-tier cities was also hit by the tough measures, with weekly secondary-market transactions falling 70.5 per cent in Jinan, in Shandong, and 30.9 per cent in Tianjin, agents said.
"Sales in the secondary market in Beijing have completely ground to a halt," said Kenneth Pak Kei-yuen, a senior general manager in Midland Realty's Beijing office.
Pak said the reintroduction of a 20 per cent capital gains tax, which took effect on April 1, undermined market sentiment.
"Existing owners are reluctant to sell their flats because of the heavy tax, while homebuyers are adopting a wait-and-see stance after the tough measures," he said.
"Even though some owners are willing to give more room for negotiation, potential buyers are still scared to enter the market at this moment."
Beijing and 20 other cities unveiled further property controls last week after being directed by the central government in March to calm real estate markets.
The controls include strict checks on mortgage qualifications for those buying second homes.
"It will take longer for homebuyers to digest the new measures given the rules in Beijing are much harsher than other cities," he said.
Single Beijing residents are banned from buying second homes, with effect from March 30, 2013. Previously, those residents could buy two homes in the capital.
In addition, the down payment for a second home was increased from 60 per cent to 70 per cent of the flat price, and the mortgage rate is 110 per cent of the benchmark rate.
Pak attributed the sharp fall in transactions this month to most sellers and buyers racing to beat the April 1 start of the 20 per cent capital gains tax.
Most cities recorded explosive growth in home sales last month, with Beijing sales jumping 332 per cent to 43,780 deals done and Shanghai's secondary market surging 370 per cent to a record 69,000 deals.