Beijing halts presale permits in latest bid to cool property market
Authorities launch separate crackdown on developers and property agents who fail to display home prices “clearly in conspicuous positions”
Authorities in Beijing are refusing to grant presale permits to developers who they say are charging too much for apartments, in the latest tightening of restrictions designed to cool the city’s sizzling property market.
At least six builders in the capital have had their recent applications for the permits, which would allow them to sell units while they’re under construction, turned down on the grounds that their proposed sales prices are “significantly higher” than the prices of nearby existing projects.
The developers say they have no choice but to set their unit prices higher than their neighbours because they paid more for their land, and accuse the authorities of undermining the market. Some decided to withhold a proportion of their units from the market, hoping the restrictions may be eased in the future.
But the regulator said this practice was “unlawful” and accused the developers of “hoarding homes”. It has since imposed a moratorium on presale permits for all new projects in the city, according to the Beijing-based China Times.
“It’s unfair to compare the new projects with surrounding projects because those projects were built on plots that were much cheaper,” said an executive with a Beijing-based developer who declined to be identified. “Under such a restriction we’d rather not get land and build homes.”
Ding Zuyu, co-president for E-House (China) Holdings, a real estate services company, said taming home prices by restricting presale permits goes against the principle of a market economy.
“Now land prices in many cities are high. Capping the prices of homes built on it is a breach of the contracts, unless maximum home prices had been agreed when the land was sold. The administrative move may curb prices for a while, but in the longer term it will only lead to the opposite,” he said.
Presale permits enable developers to recover cash before the homes are built and delivered, and are a common feature of the property landscape in the mainland.
To apply for one, developers have to submit a maximum price they intend to sell the homes for, and their application may be denied if the authorities disapprove of their pricing plan.
The new tightening of restrictions on the permits has led to a decline in new supply. Only 800 private new homes were registered as being sold in the last week of October, a 32.5 per cent fall from a week earlier, according to 5i5j, a Beijing-based real estate brokerage. For the whole of the month, Beijing home sales volume plunged 41 per cent year-on-year, China Real Estate Information data show.
The latest measures in Beijing come amid a nationwide tightening of regulations in the property market as the government intensifies efforts to rein in surging house prices.
China’s National Development and Reform Commission and the Housing and Urban-rural Development Ministry on Tuesday launched a crackdown on developers and property agents, focusing on their “failure to mark the prices of new and existing homes clearly in conspicuous positions”.
Inspection teams will be sent out, and consumers are being encouraged to report such cases. The campaign also targets firms who disclose their home inventories incompletely, or fail to give specific prices for all available units, according to a statement.
Many developers say a recent government crackdown on “false marketing” has forced them to halt all their promotional activities because they are unsure where the legal boundary is. For example, they are having to refrain from using phrases such as “500 meters from the nearest metro station”, even if the claim is true, as the new rules require them to provide third-party verification.
In Shanghai, new regulations stipulate that commercial banks begin rechecking the marital background of people applying for mortgages. Those who had divorced less than six months ago are being scrutinised again, and their applications denied if they failed to meet the new, stricter criteria.
People who are unmarried with no homes in their names are entitled to a much lower down payment in most Chinese cities, which has led to a wave of divorces as people tried to get on the property ladder amid surging home prices.
Yan Yuejin, an analyst with E-House China R&D Institute, said: “Those who bought homes less than half a year ago could be basically regarded as investors taking advantage of the loopholes. Heightened checks could reduce such phenomenon.”
However, he acknowledged that such trends are in essence driven by loopholes in the regulations in the first place.