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Pre-owned home transactions in Beijing tumbled by almost 70 percent in the first week after the municipal government announced detailed measures to cool the property market, industry statistics showed on Monday.
"Most buyers and sellers have adopted a wait-and-see attitude after the local government announced its property rules, leading to a drop in property transactions," said Hu Jinghui, the vice-president of 5i5j Real Estate.
"Very few buyers have cut prices to seal a deal."
Data from 5i5j showed that registrations by potential buyers and sellers at the brokerage firm dropped around 10 percent during the week from March 31 to April 5, while the total number of transactions of pre-owned homed fell 68 percent on the previous week.
The authorities in Beijing said on March 30 it would strictly implement a 20 percent capital gains tax on property sales, if a homeowner sells a property within five years of its purchase and the apartment is not the only one owned by a family.
Single adults with a Beijing hukou - their registered permanent residence - are now allowed to buy only one apartment, as opposed to two previously.
And the government will also not grant sales licenses to projects priced "much higher" than the average rate in the region.
All the measures went into effect on March 31.
Beijing's regulations are believed to be the most rigorous of the cities that have launched detailed rules following the introduction of the State Council's measures to cool the sizzling real estate market.
"We usually worked until 10 pm before March 30; but last week weren't nearly as busy," said Chen Jia, an agent with the brokerage firm HomeLink.
"We had a few enquiries about the new policies, rather than any about actual transactions.
"Only those sellers who need money badly are willing to share the 20 percent individual tax with buyers," Chen added.
However, compared with shrinking transactions in the pre-owned sales market, the home leasing market was brisk, as more potential sellers considered renting out their homes.
"Imbalances in the home leasing market have eased since the new policies, and rents are stabilizing," said Hu.
Meanwhile, other conditions are also affecting sales.
According to media reports, around 30 real estate projects in the capital have failed to get sale licenses as scheduled, as planned sales prices are considered much higher than previous projects or average prices in the region.
Also, down payments for second-home buyers in Beijing have been raised to 70 percent from the previous 60 percent. The 10 percent increase is being applied to both commercial lenders in Beijing and the mandatory provident fund center, which may help further curb speculative home purchases, said analysts.
"These measures will hurt home buyers who want to improve their living conditions by selling a smaller apartment and purchasing a bigger one," said Zhang Dawei, the research director at real estate brokerage company Centaline Group.
Beijing's mandatory provident fund center confirmed in a statement on Sunday that down payments for second-home buyers will be increased by 10 percent, but the mortgage rate will remain unchanged at 1.1 times the benchmark interest rate.
According to a report in Beijing Business Today on Sunday, the Beijing operations office of the People's Bank of China also issued a notice to commercial banks in the city, requiring the down payment for second-home buyers to be 70 percent, adding loans to third-home buyers are being prohibited.
Industry analysts said that considering the central government's determination to rein in the property market, commercial mortgage rates for second-home buyers are unlikely to be lowered more than the current 1.1 times the benchmark rate.
"As second-home buyers do not account for a big proportion of the commercial bank market, lenders are unlikely to feel any major impact," said Lian Ping, chief economist with Bank of Communications.
huyuanyuan@chinadaily.com.cn
(China Daily 04/09/2013 page14)
