Transactions to drop this year; cities to take tailored measures, experts say
China's real estate market is expected to cool in 2017 as regulations on home purchases expand, analysts said Sunday after several cities recently tightened their policies on mortgages.
Regulators in Beijing on Wednesday announced new mortgage policies for banks. Under the new policies, the longest repayment term for a second home loan will be reduced to 25 years from 30 years previously, the Beijing Morning Post reported on Friday.
Also, since the start of 2017, banks in cities like Beijing, Guangzhou, capital of South China's Guangdong Province, and Qingdao, East China's Shandong Province, are discounting mortgage rates as much as 10 percent off the official benchmark rate, down from 15 percent previously, according to media reports.
The one-year benchmark lending rate set by the People's Bank of China, the country's central bank, is 4.35 percent. The interest rate for loans up to five years is 4.75 percent and for loans longer than five years, the rate is 4.9 percent.
Song Ding, director of the tourism and real estate center of the China Development Institute, told the Global Times on Sunday that "housing markets in the nation's first-tier cities have been tightened since the second half of last year, and the home purchase limits will persist in 2017. Beijing's shorter mortgage repayment terms can be regarded as a sign of that trend."
The nation's first-tier cities are Beijing, Shanghai, Guangzhou and Shenzhen, Guangdong Province.
Yan Yuejin, research director of the Shanghai-based E-house China R&D Institute, agreed with Song, saying that regulations on mortgages for second homes will become a focus of local governments in 2017. That will have a negative impact on buyers who aim to trade up to better housing.
Governments' regulations are having an effect, and domestic property markets in China's first- and second-tier cities will stabilize this year while fluctuations still persist, Song said, noting that housing prices in some second-tier cities will fall further than those in first-tier cities.
The Beijing Municipal Commission of Housing and Urban-Rural Development said on Friday that since late October, home prices of completed apartments in the capital have been flat on a month-on-month basis, after the city announced housing purchase limits on September 30, 2016, domestic news portal people.com.cn reported Saturday.
Among 15 cities monitored by the National Bureau of Statistics (NBS), including the first-tier cities and some second-tier cities where housing markets are overheated, 12 cities reported month-on-month drops in new home prices in January, with declines of 0.1 to 0.4 percentage point, said NBS data released on January 18.
Those cities include Beijing, North China's Tianjin Municipality, Shanghai, Shenzhen and Nanjing, East China's Jiangsu Province, according to the NBS.
China's property market will grow in the long run, with home transactions possibly hitting new record highs and housing prices continuing to rise in the coming years, Yan of E-house China R&D Institute told the Global Times on Sunday.
But in the short term, such as the first half of this year, housing prices in first-tier cities and some second-tier cities will be stable while prices are likely to rebound in the second half, which should be a signal for caution, experts forecast.
Some second-tier cities where average home prices exceed 10,000 yuan ($1,453) per square meter are more likely to report increases, according to Yan.
"For example, Ji'nan, capital of Shandong Province, would possibly see a new round of speculation in the property market after the city's subway finishes construction in the future," he said.
House transactions across the country will decline about 5 percent year-on-year in 2017 but average transaction prices will rise around 6 percent on a yearly basis, Yan noted.
In a guideline released on January 11, the central government pledged breakthroughs in government allocation of resources, saying that to support a national unified market, China will encourage regions to explore innovative measures in property taxes, health and elder care, the Xinhua News Agency reported.
The guideline represented progress as it stressed that local governments are encouraged to adopt property tax measures that suit local conditions, according to experts.
"Property taxes are a major issue, and the Chinese government has done some preparation work. But it will still take time for local governments to officially put the idea into practice," Song said.
Also, authorities are expected to roll out stricter rules in the near future to better manage domestic property agents, because "irregular operations" persist in the sector, according to Song.
