Bad news for Shenzhen housing speculators as officials steer home prices below market levels

Shenzhen recorded a 48.4 per cent jump in prices over the past two years in February, outpacing gains in major Chinese cities

Some banks are said to have adopted the city’s reference prices for lived-in homes, potentially squeezing mortgage loan valuations and chilling demand

Reading Time:3 minutes

Residential towers are seen in Shenzhen, the wealthiest city in southern Guangdong province. Photo: Reuters

Published: 10:00am, 24 Feb 2021Updated: 10:28am, 24 Feb 2021

Shenzhen’s local government is seeking to stem a housing market bubble in the city by setting “reference prices” for lived-in homes at below market levels, a move that is expected to squeeze mortgage financing for homebuyers.

The Housing and Construction Bureau on February 8 disclosed the indicative prices for 3,595 lived-in residential estates in the city dubbed as China’s Silicon Valley, following a series of administrative curbs last year to tame the market.

The reference prices are about the same levels as those marked in new launches, and about 10 to 40 per cent below those cited in the secondary market, analysts said. This may chill demand as banks tighten mortgage loan financing based on lower valuations and homebuyers are forced to come up with higher down payment, they added

“This policy is quite hawkish to the Shenzhen’s housing market,” said Raymond Cheng, a managing director at CGS-CIMB Securities. “In the short term, secondary market transactions will be frozen.”

Shenzhen home price increase outpaces major Chinese cities

China’s economic recovery from the Covid-19 pandemic has also underpinned confidence in spending. New home prices in 70 major cities rose 0.28 per cent in January from December, the government said on Tuesday. Secondary market prices rose 0.37 per cent, the most in 18 months.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x