Cross-posted from Investing in Chinese Stocks.
Ifeng is reporting that Fujian province has made a lot of policy changes to boost housing. There is preferential sales tax on new home sales. For existing homes held for more than 5 years, there is no sales tax. People who pay off their mortgages in full qualify as as a first-time home buyer when borrowing again. There will be no limits on price adjustments for new home pre-sales. A lot of the measures are government related or not concrete: timely approval for developers, faster mortgage processing, etc.
The key to these reforms is market sentiment. All the reforms can support the market, but if sentiment doesn’t turn around, these policy changes will not change the trend. At best they will nudge it, and a successful nudge will be evident in the data over the next month or two, but if sentiment doesn’t turn, on a long-term price chart the bailout will barely be detectable.
Fujian is under serious economic pressure at the moment due to overcapacity in the textile and shoe industry weighs on local economies.
The policy nerves are spreading to tier one cities as nearby cities ease property restrictions and attract demand. The Shenzhen government recently held a closed door meeting with developers to discuss the trend in the market. Reports say that Shenzhen has already prepared real estate tax cuts and lower down payments on a second home (down 10% to 60%), but hasn’t announced easing of buying restrictions. According to a government official, the policies may not be implemented, but it shows the state of the government’s state of mind. Shenzhen’s GDP growth has slowed to 8%, foreign trade, manufacturing and consumption have all slowed, but the government hopes real estate investment and consumption can strengthen and pull the GDP growth higher. According to officials, Shenzhen also planned to intervene in 2012, but the market picked up and the plans were shelved.
The meeting with developers covered topics such as falling investment and sales, whether the city should adjust policy, if the slowdown in second and third-tier cities will affect Shenzhen, etc.
It’s expected the government will be unable to ease buying restrictions or intervene in a serious manner in the next few months, if even this year. The city may try some other indirect policy changes though, which would not qualify as easing restrictions on the real estate market. Importantly, Shenzhen does not rely on land sales for financing government operations, so it faces far less pressure to intervene from a fiscal standpoint.
Another article recounts that buyers are hoping the first tier cities of Beijing, Shanghai, Shenzhen and Guangzhou will ease real estate buying restrictions, given that price drops in second and third-tier cities led to easing. One investor planning to buy existing homes in Beijing says he’s been getting lots of calls to see properties, indicating sellers are growing in number.
There isn’t a lot of new information in the article. At this point, the easing of restrictions in first-tier cities is unlikely, but it shows there are still die hard real estate investors ready to buy. Where policy has been eased, the results are mixed. As one person quoted in the article below said, in most places the rebound in sales is an “Indian Summer” that isn’t expected to last.
