Shanghai and Shenzhen home deals plummet over weekend after tighter policy measures

Home transactions in Shanghai and Shenzhen fell sharply over the weekend as the cold winds of tighter policy measures buffeted buyer sentiment.

Shanghai home sales measured by floor area fell to 59,200 square metres overnight on Saturday, a day after new local government cooling policies were announced, according to data complied by consultant China Real Estate Information Corporation. On Sunday, the sales volume fell further to 41,500 sq metres.

This represented a decline of 67 per cent and 77 per cent, respectively, over the sales volume of 178,000 sq metres recorded on Friday.

In Shenzhen, home sales by area were 16,300 sq metres on Saturday, but fell sharply to 4,500 sq metres on Sunday.

“Shanghai’s tightening measures were the strictest policies ever announced in history,” said Lee Wee Liat, head of financial institution group and property research at BNP Paribas Securities (Asia).

Under the new policies in Shanghai, non-local home buyers – those without a Shanghai Hukou residency – are required to provide evidence they have contributed to social security for five consecutive years or provide income tax returns for the same period, compared to two out of the three latest years under the previous policy.

For local second-home buyers, the downpayment requirement for a new purchase increases from 40 per cent to 70 per cent if the new apartment is larger than 140 sq metres, and 50 per cent if the apartment is less than 140 sq metres.

Shenzhen, which announced tighter policies on March 26, requires home buyers without a Shenzhen Hukou to provide evidence they have contributed to social security for as long as three years,

compared with one year previously.

Local home buyers with a Shenzhen Hukou who already own one home, or even if they do not currently own an apartment but have a mortgage history in the past two years, are required to pay a 40 per cent downpayment against 30 per cent previously.

Lee said the biggest impact of the policies would be for upgrading demand.

“As such, transaction volumes in Shanghai are likely to fall in the second quarter, third quarter and fourth quarter of this year as people postpone their purchases,” he said.

Besides Shanghai and Shenzhen, Wuhan and Nanjing also announced tightened policies last week to varying degrees to rein in property prices, while Zhengzhou, Ningbo and Sichuan provinces continued to roll out measures to stimulate transaction volumes and prices.

Beijing and Langfang are also said to be announcing tighter policy measures in the next few days.