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Facts About Property Price Increases in China

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economy_5 May 24, 2010 (Linette Ng) The graph below demonstrates the price indices of property sales in China over the last 14 months, with the latest price rise of 12.8% year-on-year in April. However, in mid-April, the government has adopted tightening measures to curb the price rises, and the effect of these will likely be reflected in the price indices for May. In the week following the release of the new policies, new and second hand housing prices fell by approximately 30% in Beijing. The average house prices in Shenzhen fell by 25.44% and in Shanghai by 12.2%.

The policies implemented by the government include:

• Increasing the required down payment for a second housing mortgage from approximately 30% to the current 50%. (April 15)

• Increasing the borrowing rate on the second mortgage to 1.1 times the benchmark rates. (April 15)

• Local governments can restrict the number of units that can be bought. (April 17)

• Banks are required to suspend lending to third home buyers, and to those who cannot provide tax returns or proof of social security contributions in the related city for at least one year. (April 17)

• Property developers who deliberately delay proposed sales dates to raise housing prices will be punished. (April 21)

• Developers are not allowed to take deposits for sales of uncompleted apartments without approval. (April 21)

• Developers must disclose to the public all apartments available for sale along with their prices, and commence sales within 10 days upon obtaining pre-sale approval. (April 21)

Beijing city government was one of the first cities to follow up on the central government’s policies, announcing 12 measures to curb speculative price rises in the local property market, including limiting the number of units that can be bought and increasing the down payments and mortgage rates. Average prices of Beijing’s commercial residential properties for the week ended May 9 fell by 9.6% from the week before, and 31.43% from the week ended April 11. Prices of newly built houses in Beijing declined between 2,000 to 5,000 yuan. With these measures put in place to curb the speculation of the real estate market, the property sales and price rises are expected to slow down.

prop_proces_Lin_0527

Data sourced from National Bureau of Statistics of China

 



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