Cracks appear in Beijing’s housing market, as up to 80 pc of sellers lower asking prices
Transactions have slumped since mid March amid a sudden U-turn in confidence as the credit squeeze weighs on homebuyers
Beijing’s secondary housing market has cooled for a third straight month, with growing evidence that buyers now have more leverage to negotiate than they did earlier this year, thanks to government efforts to tighten credit and curb pockets of overheating by pinpoint policy adjustment.
The market has cooled sharply since March 17, when Beijing’s municipal authorities tightened rules such that those who had paid off previous mortgages would no longer be classified as first-time buyers. In addition, new caps on mortgage lending meant second home buyers had to put up a minimum payment of 80 per cent. A majority of prospective buyers were priced out due to the higher purchasing threshold.
Housing agents say transactions have slowed dramatically as sellers are reluctant to compromise much on price while buyers are sitting on the sideline waiting for bigger bargains.
Monthly sales transaction are set to touch a 28-month low in June as just 4,082 homes changed hands in the first half of the month, compared to 10,250 for the whole May, which reflected a 27-month low, according to agent 5i5j.
Meanwhile, more than 80 per cent of Beijing owners are reducing their asking prices, while just three months ago, 80 per cent were raising prices, according to property agent Homelink.
Underscoring the U-turn in market sentiment, local media reported that one homeowner cut the asking price of a four-bedroom home located outside the Northern fifth ring road by 5 million yuan in May. Initially the homeowners were asking an inflated 16 million yuan, while other homes in the same areas were asking 13.5 million yuan. Eventually the home sold for 11 million yuan at the end of May, in line with the average selling price at end-2016.
Price discounting has also been seen in certain pockets of the city.
The value of homes in sought-after school districts plunged after local governments amened policy in late March such that home ownership did not guarantee the right to school access.
Desireable school districts were among overheated property market in the city, with prices nearly doubling in six months to 150,000 to 200,000 yuan per square metre, before the new policy was announced.
In a reversal from three months ago, when home prices were rising regardless of layout, design, and building age, buyers now have a lot more negotiating power. Homes that are far away from transport hubs, or suffer from poor build quality, or other aesthetic issues, are more susceptible to price depreciation.
“The pre-owned home market is extremely complicated. Various factors, such as the age of the building, the number of storeys, layout, total size of the home, made a huge difference. Simply looking at the average prices, or individual cases are meaningless,” said Guo Yi, chief marketing officer of Beijing-based Yahao Consulting.
