Shanghai’s price controls on new homes the toughest in China, says Jinmao chief

Shanghai’s price controls over new homes are the toughest among all mainland Chinese cities, according to state-owned property developer China Jinmao Holdings.

Government price guidance on newly launched flats is the latest measure undertaken by a number of major Chinese cities to rein in skyrocketing home prices. Builders that don’t follow the price guidance will be denied presale permits.

“The price cap has been implemented and will continue to be in place [in selected Chinese cities], but Shanghai’s controls are stricter than any other city,” China Jinmao’s chief executive officer Li Cong Rui told the South China Morning Post during an interim results briefing in Hong Kong on Tuesday.

The developer, a subsidiary of state-owned oil company Sinochem Group, has been struggling to get presale permits for Phase II of its large scale, high end residential project Daning Jinmao Palace in Shanghai amid the price control measures. The project has already postponed its planned launch for more than three months.

In terms of market price, Li said the Daning project could have sold for 130,000 yuan (US$19,400) per square metre because of its prime location in Shanghai’s central Jing’an District. However, the company now has to cut the price by about 30 per cent to between 90,000 to 100,000 yuan per sq m to meet the government requirement.

“The government has agreed to our adjusted price but we are still waiting to get a sales permit. Hopefully we can launch sales within this year,” Li said.

With robust demand, Shanghai’s property cooling measures are unlikely to last

Home prices remain at high levels in big cities including Shanghai, Beijing and Shenzhen despite a raft of government tightening measures imposed since late 2016.

Official data shows new home prices picked up 9 per cent in Shanghai in the past 12 months. Beijing saw an 11 per cent increase, while Guangzhou and Shenzhen were 3 per cent and 17 per cent respectively.

The Guangzhou housing authority reiterated in a notice on its website last week that new property developments in the city that do not follow the government’s price guidance will not be issued with presale permits.

Although transaction volumes could cool off amid the property curbs, which range from higher mortgage down payments to price intervention, home prices in major mainland cities are unlikely to be affected throughout the year, said Li.

“In Shanghai, new flats are actually in an undersupply situation and demand is very strong,” he said. “The government should accelerate the granting of sales approvals [rather than doing the opposite].”

China Jinmao, which is known for its 88-storey Jin Mao Tower in Shanghai and owns residential projects, hotels and offices in more than 10 Chinese cities, said its net profit for the first half surged 93 per cent to 2.5 billion yuan, thanks to increased home sales.

Li said the senior management have plans to increase their stakes in the company as a vote of confidence in its future prospects.