Beijing down 29% ?

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On new years day of this year the Chinese government announced that it had a new plan for housing

China’s central government will strengthen its campaign to control soaring housing prices in 2011, a senior official said on Wednesday.

Minister of Housing and Urban-Rural Development Jiang Weixin told a national work conference that the government will increase the regulation of the country’s property market while also strengthening the implementation of tightening measures introduced in 2010.

Jiang said the central government will provide more favorable policies to help people who buy houses to live in but, in a bid to stop housing prices soaring, it will restrict house purchases intended for investment and speculation.

Jiang said that the ministry would assess local governments’ performances in stabilizing property prices to ensure central government measures are properly implemented.

In 2011 China will also continue to increase the supply of land for residential properties and strengthen the management of the Public Housing Fund.

According to Jiang, in the next five years China will increase the supply of affordable housing, renovate more shantytowns and develop public rental housing to solve the accommodation problems of middle- and low-income earners, the newly employed and migrant workers.

The country built 5.9 million units of affordable housing and renovated 1.36 million dangerous rural dwellings in 2010, compared with the annual target of 5.8 million units and 1.2 million units, respectively.

In 2010 the government introduced a string of tightening measures to cool the real estate market, including suspending mortgages for purchases of third homes in Beijing, Shanghai and other major cities, speeding up trials of possible new property taxes and raising down payment requirements for first-home buyers.

At the end of March the government announced that it required regional governments to curb house prices.

The Beijing municipal government pledged to keep new home prices steady or even lower them this year in response to the Central Government’s call to keep housing prices in check, local and international media outlets reported Wednesday.

Beijing is the only city that wants to drop new home prices as part of its plan to curb housing prices, China Business News reported.

About 40 additional Chinese cities announced price-curbing targets after the central government ordered local governments to submit real estate price-control targets by the end of March, the newspaper reported.

The capital city’s measures are reportedly the strictest among price-curbing plans announced so far, the newspaper stated.

“Beijing’s property curbs always are the most severe among peers,” Jeffrey Gao, a property analyst at Royal Bank of Scotland Group Plc, said.

Beijing’s municipal government also plans to promote government subsidized housing, especially the affordable rentals this year, according to the report.

Most cities have connected home prices with their economic and income growth rates, Bloomberg, an international news wire service, reported.

Shenzhen and Guangzhou in southern Guangdong province announced that new home prices in their cities will be restrained at a pace lower than local economic and average disposable income growth rates, the 21st Century Business Herald in China reported, citing statements by government officials.

Year-on-year prices for new homes in Shenzhen and Guangzhou are expected to increase about 11 percent, the newspaper estimated.

Officials in the northwestern city of Xi’an said home prices will be capped at 15 percent this year, and Lanzhou, the capital city of Guansu province, set a 9 percent price ceiling, the report stated.

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Shanghai is also on board,

The Shanghai municipal government announced on Monday evening its target for controlling the growth rate of city housing prices this year, becoming the first among first-tier cities to make that commitment. Experts said the goal is attainable.

The city intends to keep the rate of price increases in newly built homes in 2011 lower than the growth rate of the city’s gross domestic product (GDP) and per capita annual income of urban and rural households. Meanwhile, the total area of completed government-subsidized properties should exceed that of commercial properties, a notice on the city’s website said.

The notice comes amid calls from the central government to cool overheated property markets across the nation. The State Council launched a series of tightening measures on Jan 26 to contain housing-price increases, including raising the down payment for second-home buyers to 60 percent of the full price, from 50 percent, and requiring all local authorities to set their annual home-price-control targets by the end of March.

However, as of late Monday, only 69 of the more than 600 cities across the nation had announced their plans, according to Oriental Morning Post report.

In January, Shanghai forecast its GDP will expand by 8 percent in 2011 and its per capita annual income of urban and rural households will maintain a similar pace.

“The goal is reasonable, and it shows the local government’s determination to rein in soaring home prices,” said Ding Zuyu, co-president of the China Real Estate Information Corporation. Because of the restrictions imposed on families buying more than one property, the limited high-end property transactions will not drive the average home price higher, and that guarantees the goal will be realized, Ding added.

“The local government will reach the goal by all means,” said Chen Sheng, deputy director of the China Index Academy in Shanghai. “The increased supply of land and government-subsidized homes will greatly ease the high demand and keep housing prices from rising too quickly,” Chen said.

Most predicted this would have little effect on prices.

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Some expect that dozens of cities in China will step up property market curbing measures in the near future. Analysts say these moves may cut trading volumes by 20 to 30 percent. Housing prices may also fall, but not significantly.

Analysts say the curbing measures will encourage more Beijing house hunters to wait and see, and the trading volume will slump in the near future – by up to 30 percent. But due to insufficient supply, property prices aren’t likely to fall by much. As the measures taken in second and third tier cities aren’t as restrictive as those implemented in first tier cities, trading volumes there will only fall by 5 to 10 percent.

Yet it seems those predictions may have been a little out. Today I read,

Prices of new homes in Beijing dropped 26.7% month-on-month in March, the first fall in 19 months, the Beijing News reported on Tuesday, citing unsourced data.

New home prices in Beijing averaged RMB 19,679 per square meter last month, down 10.9% year-on-year, the first annual drop since September 2009, the paper said.

A month earlier, home transaction volumes in Beijing slumped 70% m-o-m, thanks largely to the 15 new property rules unveiled in line with the State Council’s eight guidelines on the property market.

The city’s home transactions continued to fall in March, posting a decrease of 48% from a year earlier, a trend experienced by a large number of major cities monitored by the China Index Research Institute (CIRI).

Home transactions in those cities shrank 40.5% year-on-year on average in March, according to CIRI data.

“The reduced transaction volume indicates the government’s policies have been effective in curbing speculative buying, and as far as I know, around 90% of the transactions were made by home buyers with actual demand,” a person from the Beijing Municipal Commission of Housing and Urban-Rural Development was quoted as saying in the report.

After the introduction of the home-buying restriction measures, the proportion of non-local buyers of second homes in Beijing dropped by more than 40% to only 7.6% of total buyers, the paper said.

Authorities in Beijing surprised the market recently after saying the city would aim at “keeping prices for newly built ordinary homes stable or slightly down from 2010”. Most analysts and market watchers had been concerned that local governments were focused only on driving growth rather than containing soaring prices.

“Beijing’s property market is gradually moving back on track, as home prices are going down, non-local buyers are buying less. I think this could prove that the local government’s policies have played their [intended] role,” said Chen Zhi, deputy secretary-general of the local real estate association.

Last weekend, Chinese Premier Wen Jiabao urged local governments to take responsibility for keeping housing supplies and prices stable for this year. The premier has been urging for stronger action in tackling property issues since the second half of last year.

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These figures look a little over the top. So is this a case of “data to match the rhetoric” or has their suddenly been a turn in the Chinese property market? Time to step back on the gas again ?