Shenzhen’s housing market downcycle ‘has begun’ after cooling measures as banks tighten mortgage lending

Name: Cheap housing but few economic opportunities for young Chinese in city along Russian border
Uploaded: 2021-05-12T00:30:09.000Z
Duration: 8 min 7 s
Description: Cheap housing but few economic opportunities for young Chinese in city along Russian border

Transaction fell by about one-fifth during the Labour Day holiday, while China Construction Bank lifted home financing rates

Higher mortgage rates is a signal the government will launch a long-term price mechanism to crack down on speculation, researcher says

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The Beijing-Hong Kong-Macau expressway is lit up with Shenzhen’s Nanshan district in the background. Photo: Roy Issa

Pearl Liu

Published: 8:30am, 12 May 2021Updated: 11:07am, 12 May 2021

Shenzhen is showing some early signs of success in containing runaway house prices in the technology hub after 13 rounds of market-cooling measures since last July, repairing its reputation as a model city envisioned by President Xi Jinping.

The city recorded 270 units in home sales during the recent Labour Day from May 1 to 5, or about 20 per cent lower than the volume during the same holiday season last year, according to data compiled by Midland Realty. Some 724 units were transacted during the same period in 2019.

Tightening credit for home mortgages has also played a part in reining in the buying frenzy that gripped the Silicon Valley of China over the past two years. China Construction Bank, for example, has lifted its mortgage rates by 15 to 35 basis points, the 21st Century Business Herald reported earlier this month. Analysts expect more measures to tame the housing market.

“Higher mortgage rates, particularly for second home purchases, is a signal the government will launch a long-term price mechanism to crack down on speculation,” said Li Yujia, senior economist with the Real Estate Assessment and Development Research Centre, a research arm of the city’s government. “Clearly, a downward cycle for the housing market in the city has begun.”

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Cheap housing but few economic opportunities for young Chinese in city along Russian border

Shenzhen’s economic size has multiplied over the past 40 years, hailed by Xi as a miracle since overtaking Hong Kong and Singapore. Many of its companies have become world beaters in their fields, including WeChat operator Tencent Holdings, telecommunications giant Huawei Technologies and drone maker DJI.

Beijing unveiled a blueprint to turn Shenzhen into a “pilot demonstration area for socialism with Chinese characteristics” which would see it becoming a world leader in technology and innovation, public services and the environment by 2025.