The Beijing municipal authorities' latest efforts to contain house price inflation will fail, as the measures have not eased market worries about rising home prices due to a shortage of supply, real estate agents say.
The measures, announced last week, are intended to increase the supply of homes for middle-class families who have been priced out of the market but are not entitled to buy government-subsidised flats.
But buyers shrugged off the measures, with sales of flats at new projects remaining buoyant over the weekend. More than 140 flats in phase two of Central South Bay in Beijing's Daxing district were sold within two hours of going on sale on Saturday.
New home releases on that day at Capital International Peninsula and Ocean Palace also recorded strong sales, property agents said.
Kenneth Pak Kei-yuen, a general manager on the mainland for real estate agent Midland Realty, said property sales remained strong because most new projects were suburban and were priced at levels that end users were likely to find affordable.
"Many home-seekers worry property prices will go up further and are buying now despite the new measures," Pak said.
In its latest attempt to contain prices, the Beijing city government said last Wednesday it planned to supply 20,000 "self-use" flats - meant for the owner to live in and not hold as an investment - this year and another 50,000 next year. The homes will be 30 per cent cheaper than flats in surrounding areas.
Since the announcement, which the Beijing city government hoped would stabilise prices, it has set aside two land parcels that can provide homes with a combined gross floor area of 40,000 square metres. It plans to provide another six or seven sites before the end of the year.
Official data shows new-home prices in Beijing jumped 20.6 per cent in September from a year earlier, the fastest pace among all cities. Prices increased 20.4 per cent year on year in Shanghai, the second fastest.
"The measures will not have much of an impact in the short term," said Yang Chenqing, an analyst with China Real Estate Information Corporation, a real estate data provider and website operator. Beijing has taken similar measures over the past two years that failed to curb price rises.
Beijing, along with Shanghai, Guangzhou and Shenzhen, has been at the forefront of the battle to cool surging home prices on the mainland over the past decade. In April, it began imposing a 20 per cent capital gains tax on sales, becoming the first mainland city to do so.
"I'm not so optimistic about the implementation this time either," Yang said. "Let's hope things will be different under the new president and premier."
President Xi Jinping and Premier Li Keqiang formally took office in mid-March. They have not yet announced how they will attempt to engineer a soft landing for the real estate market, an industry that can take down the whole economy if it crashes.
The new measure by the Beijing government was big news upon its release but its impact so far has been minimal.
What is nerve-racking for buyers now is that homes are in short supply in Beijing, partly because the city government rejected pre-sale applications for many projects that were priced higher than it would accept.
That means actual home prices in the city are rising faster than official data imply, since to circumvent the measures some developers have taken to breaking down sale prices into three components, with homebuyers paying separately for furnishings and parking in their down payments. This allows a lower final selling price to be registered with housing authorities.
The city had fewer than 60,000 new flats available for sale early this month, compared with actual sales of 120,000 flats last year. Its plan to provide enough land for 50,000 flats next year will fully cover current sales of homes priced below 20,000 yuan per square metre.