Home price increases likely to ease as government acts to curb speculative buying Shenzhen's booming home prices are likely to pause for a breather in the wake of the government's latest string of measures to restrict speculative buying from both local and foreign investors. Responding to the new moves to put the brake on demand, property agents said price growth could slow to below 10 per cent in the second half of the year, versus a frenetic 50 per cent acceleration in the first six months. But the respite may be only temporary, they added, since sustained and robust economic growth was creating a rapidly expanding middle class that would continue to fuel demand for both owner-occupied and investment properties. On July 10, the Housing Bureau and the Shenzhen branch of the State Administration of Foreign Exchange jointly issued a measure restricting buyers from both Hong Kong and Macau to purchasing just one residential unit for personal use in that city, in line with a central directive issued last year to restrict property buying by foreigners. On July 12, Shenzhen's government followed up its delayed implementation of the measure with an announcement that developers would not be allowed to sell units or negotiate advance entitlements to buy units until pre-sale permits were granted. Once the permit was granted, it added, the units must be marketed within 10 days, and price lists must be posted at sales' offices. 'It [is also expected] that the government will impose a system next month that will introduce the regular publication of average transacted prices of units in the area,' said Andy Lee Yiu-chi, general manager of Centaline China's Shenzhen branch. The move is aimed at ending the widespread practice of under-reporting sales prices in order to escape the payment of capital gains taxes. Under the new requirements, home owners will not be allowed to sell their units at prices below the average transacted value listed by the government, Mr Lee explained. Shenzhen home sellers are widely reputed to declare fake transaction prices that purport to show they sold their properties at the same price at which they bought them. Mr Lee said the introduction of the new system would force sellers to pay capital gains tax, increase transaction costs, and impose a brake on rising value and transactions. The effects of the rumoured measures were beginning to show, he said; the number of transactions handled by Centaline since July 10 had fallen to 180 deals a day from an average of 300 deals a day last month. 'The one-home policy itself will not bring down prices substantially. But Hong Kong investors will be more cautious in view of the series of measures now being implemented,' said Michael Choi Ngan-min, chairman of Land Power International. Land Power's tally showed Hongkongers spending 4.2 billion yuan on mainland properties, primarily in Shenzhen, in the first quarter. 'Hong Kong residents account for 8 per cent of all Shenzhen property buyers,' said Mr Lee. About 20 per cent of buyers seeking flats for rental purposes already owned more than two units in the city, he said. Shenzhen home prices rose 12 to 14 per cent per month from January to May this year, putting the city in the top three markets for fastest price growth among 69 mainland cities. According to the China Securities News, home prices in Shenzhen average 14,500 yuan per square metre, up from 9,400 yuan in January. This represents growth of about 50 per cent, although agents cautioned the increase might have been exaggerated since more luxury properties were launched in the first half of this year. 'My personal feeling is the average price of upmarket properties grew more like 20 per cent in the first six months,' said Alan Chiang, the head of DTZ residential department in the mainland. But the growth has nonetheless been fast enough to alarm the central government. Representatives from the ministries of construction, land, and resources, among others, will arrive in September to investigate whether any officials have imposed arbitrary charges, abused their rights, taken bribes or illegally approved building plans, the Southern Metropolis News reported last week. But agents are still optimistic about the long-term outlook.