Anti-graft campaign a drag on China's property market
While the anti-corruption campaign on the mainland is not aimed at the property sector in particular, it is amplifying the downturn in the market, industry participants and analysts said.
While the anti-corruption campaign on the mainland is not aimed at the property sector in particular, it is amplifying the downturn in the market, industry participants and analysts said.
Since becoming head of the Communist Party, President Xi Jinping has repeatedly vowed to fight "tigers" and "flies" - powerful senior officials as well as low-ranking bureaucrats who damage the party's reputation with ill-gotten wealth. Many of their influence-for-money exchanges involved land or property deals, public accounts show.
"For the property industry, anti-corruption is the biggest tightening campaign," Wang Shi, chairman of China Vanke, the mainland's largest developer by sales, has repeatedly said this year.
No official data is available to show how badly the anti-graft efforts are hitting the country's once bubbly real estate market.
But anecdotal evidence indicates they could cool down property construction as local authorities slow the pace of new project approvals.
A sudden increase in supply of homes from officials and wealthy families concerned about the campaign is also adding pressure on the already cooling secondary market, particularly at the luxury end.
"Everything that needs a hand from the government is taking a much longer time than expected," said a real estate fund manager, who preferred to stay anonymous. "The government's efficiency has worsened since the anti-corruption campaign started. That's a clear difference from my past experience doing projects here."
This trend was a topic of discussion in recent meetings of the State Council.
Premier Li Keqiang said: "I did notice the inaction of officials in some places during my on-the-ground investigations."
A report on the government's website earlier this month quoted Li as saying: "Some government officials hold the attitude that as long as there is nothing wrong, they would rather stay put."
The fund manager said one of the projects in which he had invested could not get started because farmers were still growing vegetables on the land. The relevant local officials broke off contact with the developer because the party's disciplinary inspection team was in town.
Since last year, the party's Central Commission for Discipline Inspection has sent special teams to various provinces, state firms and universities. They found a number of corrupt officials and sent some to prison.
The slowdown in project approvals is among the factors driving down new starts in construction this year to record lows, even worse than during the global financial crisis in 2009.
Apart from that, home prices have started to fall, and a rising number of developers are facing cash flow strains, pointing to the possibility that China could become the next country to suffer a property crisis that could destabilise its broader economy and jeopardise a global recovery.
The authorities, including top officials from the banking regulator and housing ministry, have said risks are still under control.
But media reports about a flood of home supply into the secondary market are weighing on sentiment.
"Because of Beijing's air pollution problem in recent years and the deepening of anti-graft efforts since last year, the potential client groups in Beijing's luxury home market will probably change a bit; for example, the proportion of non-local buyers could decline," Ding Zuyu, co-president of property services company E-House (China), wrote in his online column.
