Beijing's cooling policies will take time to work through
Cheaper 'self-use' flats will push up supply as stock from developers' land purchases kicks in
Beijing's property market is buoyant and the buying frenzy is not likely to be easily cooled by government measures in the short term.
But the impact may be seen gradually, taking into account the lag time for policy changes to have an effect.
The local government is certainly taking action to bring prices down. Last Wednesday, Beijing's municipal government announced a new round of policies aimed at curbing housing inflation.
The authorities introduced a medium-term plan by outlining a proposal to supply enough land for 20,000 "self-use" homes by the end of this year.
The homes will be priced at about 30 per cent cheaper than comparable housing nearby.
Beijing government officials have said the homes - aimed at low to middle-income groups - are planned to be offered at 2 million yuan (HK$2.5 million) or less, with a price range from 10,000 yuan to 20,000 yuan per square metre.
Most of the units will be less than 90 square metres. So far, some designated sites have been identified in non-core districts such as Tongzhou, Dahing and Changping.
Many Beijing residents believe that the measures will not have an immediate impact on home prices.
Mainland media reported that hundreds of flats were sold in three residential developments in outer areas of Beijing on the first day of sale on Saturday.
One of my friends in Beijing used a Chinese saying to describe the ineffectiveness of the policy, Bei shui che xin, meaning to use one cup of water to put out the fire in a cartload of wood.
Home prices in Beijing have been surging in recent months, triggering concerns of a bubble and rising resentment over unaffordable homes. Prices in the first nine months of the year were up 20.6 per cent year on year, according to government data.
The shortage of supply and a growing number of aspiring home owners have continued to push prices higher.
There were fewer than 60,000 new flats available for sale early this month. The number is small when compared with the more than 120,000 units sold in the city last year. Such shortages encourage more home seekers to rush in, in fear of further price growth.
However, the situation may not be sustainable. Data shows that new home starts in Beijing in the first nine months rose 12.2 per cent year on year. More supply is expected to come on to the market after developers' aggressive land purchases early this year.
According to mainland research firm China Real Estate Information Corp, among the 120,000 units sold last year, 12,000 units were priced at 10,000 yuan per square metre or less, and 48,000 units went for 15,000 yuan per square metre.
The owners of such properties will be the hardest hit when the 20,000 units of "self-use" homes come on to the market in the coming months. By that time, the real impact of the policy will be seen.