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China property

Panic buyers swarm Shanghai’s housing market amid speculation of imminent mortgage rules

Government denied speculation, but not before anxious buyers crippled a website and set a five-month record for space sold

PUBLISHED : Monday, 29 August, 2016, 7:31pm
UPDATED : Monday, 29 August, 2016, 10:59pm

Buyers swarmed into Shanghai’s housing market last week, in a panic buying spree for apartments that crippled a government website and set a five-month record for the amount of space sold, amid speculation that the city will tighten mortgage rules to cool the housing market.

The amount of space sold soared 93 per cent over seven days to a record 555,700 square meters, setting a five-month record, according to a report by Shanghai Homelink Real Estate Agency.

Buyers piled in amid speculation that Shanghai’s municipal government was planning to raise the down payment requirements on home buyers who don’t yet own a home, but have mortgage records in banks, to 50 per cent from 30 per cent.

Down payment would jump to 70 per cent from 50 per cent for people borrowing to buy their second property starting in early September, according to speculation. Mortgage rates would also be raised for those with their second or third mortgages.

Shanghai’s government on Monday denied any plan to tighten mortgage rules, but not before anxious buyers and property agents packed a government centre where real estate was traded. So many people went on the government’s web site that it was temporarily paralysed.

“Any further measure to curb the city’s home price rise will eventually lead to another round of soaring prices,” said Dong Yanjun, a homebuyer in Shanghai, who rushed to sign an agreement to buy a pre-owned apartment in Pudong last week. “I need a new dwelling for my own before the birth of my baby. I can’t afford to a higher down-payment requirement that is rumoured to take effect in September.”

Shanghai’s home prices jumped 27 per cent in July from a year ago, and rose 1.2 per cent compared with June, according to the National Bureau of Statistics.

That makes buyers jittery, and anxious to get ahead of any rule that could make financing difficult.

Daily turnover surged all the way from 778 units last Wednesday to 1,267 units on Sunday, according to the municipality’s housing trading centre.

Transactions of secondhand homes also increased, while many developers had brought forward their sales date to cash in on the fervour, local media reported.

Some enterprising couples are even applying for divorce, so that they can skirt around the maximum loans that every household is entitled to.

Under existing rules, a second home costing 5 million yuan requires a 50 per cent down payment of 2.5 million yuan. Since the mortgage and down payment rules are calculated based on household, a divorced buyer can then be entitled to a higher loan of 3.5 million yuan, and need only put down 1.5 million yuan as down payment.

So many people are attempting to divorce that the marriage registrar of Shanghai’s Jing’an district has set a daily quota, limiting the number of divorces to 50 couples in the morning, and 40 couples in the afternoon, according to a notice at the registration centre.

A broker with property agency Century 21 China Real Estate said that a big portion of homebuyers were scared of the expected new mortgage requirements.

“Many of them are desperate for owning their own apartment despite the lofty home prices have already cost them years of savings for down payment and incurred several million yuan of debts in future,” said the broker surnamed Wang. “They have reasons to make a rush to seal the transaction so as to dodge potentially tightened home buying policies.”

Additional reporting by Alice Yan

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