Macro-economic controls that were implemented to cool down the housing market, especially high-end properties, are beginning to take effect, according to a survey released yesterday.
The year-on-year growth of average prices of new units in 70 cities decreased from 5.8 percent in June to 5.5 percent in August.
The joint findings were announced by the National Development and Reform Commission (NDRC), the country's top economic planner, and the National Bureau of Statistics (NBS).
Coinciding with that report was a central bank survey released yesterday of 20,000 customers in 50 cities showing "a continuous decline in enthusiasm in housing purchases," which contrasts with a rise in spending and savings.
That mood was starkly reflected in Shanghai, the frontrunner in the country's luxury property market, where average prices fell 5.4 percent in June, 3.5 percent in July, and 2.2 percent in August.
In Shenzhen, prices dipped but were still in double figures: 14.6 percent in June to 12.8 percent in August.
Beijing seemed to buck the trend with increases of more than 11 percent in the same three-month period.
Industry observers said that the central government's new housing policies, adopted in May, might be working, albeit slowly, and have yet to make an impact in some major cities.
According to measures that went into effect on June 1, the minimum down payment for a new apartment larger than 90 square meters was raised from 20 percent to 30 percent of the unit price.
A transaction tax is imposed on owners attempting to resell their units within five years of purchase, and not two years as it was previously.
Further, housing developers are required to build more units smaller than 90 square meters.
From a long-term perspective, a continuous price rise in the urban property market would not be surprising, James Jao, CEO of J. A. O. Design International and an expert on the property market, told China Daily.
There is huge pent-up demand, Jao said, pointing out that between 1949 and 1989, housing supply increased only 40 percent while the population grew two-and-half times from about 400 million to one billion. The population currently stands at about 1.3 billion.
Yan Jinming, a professor in land management at Renmin University of China, told China Daily that the country was "in bad need" of affordable housing for lower-income earners; and that luxury housing construction should not be a priority.
Control measures do work if implemented aggressively enough, Yan said, citing the Shanghai market as an example. They are not being enforced as effectively in Beijing, he said.
(China Daily September 14, 2006)