From Bloomberg today:
Beijing, which already has China’s strictest real estate curbs, is being forced to take additional steps to contain surging home prices as demands for record-high down payments fail to deter buyers.
The city has enforced citywide price caps since March by withholding presale permits for any new project asking selling prices authorities deem too high, according to developer Sunac China Holdings Ltd. (1918) and realtor Centaline Group. Local officials will need further tightening as they struggle to meet this year’s target of keeping prices unchanged from last year, said Bacic & 5i5j Group, the city’s second-biggest property broker.
The failure of official curbs to stem price increases in the nation’s capital highlights the government’s struggle to keep housing affordable as urbanization sends waves of rural workers into China’s largest cities. New-home prices in Beijing rose by 3.1 percent in April from the previous month, the biggest gain among the nation’s four so-called first-tier cities, and climbed by the most after Guangzhou in May, according toSouFun Holdings Ltd. (SFUN) They rose in each of the first five months of this year.
“As the Chinese capital, and a city widely watched for the direction of property curbs, Beijing is under a lot of pressure to tighten further as it’s still leading price increases,” said Luo Yu, a Shanghai-based analyst at CEBM Group, an advisory company that covers industries including property. “More cities may follow suit with price caps.”
As the nation’s economic growth moderates, the possibility of monetary tightening or a nationwide property tax — dubbed by Societe Generale SA “nuclear weapons” — diminishes, leaving local authorities little choice but to tighten short-term price restrictions amid a worsening supply shortage.
“If tightening in the property market is too stringent, it would impact growth,” Citigroup Inc. analysts, led by Oscar Choi, wrote in a May 6 report. China’s economic expansion slowed unexpectedly in the first quarter as gains in factory output and consumption weakened.
I expect regulators to continue to put the boot down more firmly, ala Phat Dragon’s Chinese cycle clock, until they gain traction. Hopefully without a bust.
