China home price

Shenzhen new home prices little changed for 18-straight month in March, as ‘iron-fisted’ measures calm market

PUBLISHED : Tuesday, 03 April, 2018, 1:59pm
UPDATED : Tuesday, 03 April, 2018, 10:57pm

Shenzhen, the Chinese city with the largest population growth, saw its new home prices little changed in March, reflecting the 18 straight month of flat price movements, a result of an iron-fisted government clampdown since late 2016.

Prices were down 6 yuan (95 US cents) per square metre on average for the month, pointing to strong underlying demand, even as the government’s campaign to cool the market remains in full swing.

Average transactional prices in March fell 0.01 per cent on month to 54,185 yuan (US$8,617) per sq m, according to the Shenzhen government. Compared with one year ago, prices fell 1 per cent, or 545 yuan per sq m.

“If you take into account the mortgage rate increase, payment pressure actually has risen. What’s more, [new] home prices jumped more than 40 per cent in 2016,” said Xie Yifeng, a senior Shenzhen property commentator.

He Qianru, chief analyst with property brokerage Midland Holdings China, said Shenzhen’s new home market is stable in terms of sale volume and price action.

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This follows strict rules imposed in October 2016, including a tightening in the down payment ratio, buying eligibility restrictions and price controls.

In some instances, residents without a Shenzhen household registration, or hukou, are allowed to purchase a single property after making social security payments in the city for at least five years, a tightening from the three year requirement in the past.

Buyers who’ve previously had a mortgage are considered “second-time buyers” subject to a 50 per cent down payment, even if they have paid off the initial loan.

The measures, viewed as the strictest on record, were unveiled to combat overheating.

Prices in Shenzhen, dubbed China’s “Silicon Valley”, jumped 60 per cent in the first quarter of 2016 on year.

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New home sales in March jumped 155.5 per cent on month, while secondary homes sales were up 79 per cent, according to Midland.

Last week authorities in Shenzhen rolled out a new policy that could add to the cost of buying a home in the secondary market, sparking a rush among buyers to register sales before the policy took effect.

Average prices in Shenzhen’s secondary market rose 3.9 per cent in 2017 on year to 54,519 yuan per sq m, according to Midland.

Andy Lee Yiu-chi, chief executive of Centaline Property Agency in Shenzhen, said the new policy which requires homebuyers to choose between higher taxes or smaller mortgages, could divert demand to the new home market.

However, the new home market is being squeezed by tight supply. On average three pre-owned homes are sold in Shenzhen for every new home old, Lee said.

Last year Shenzhen recorded net population growth of 620,000, the highest in the past six years. In comparison, Beijing and Shanghai recorded net outflows.