Home » Business » Real Estate
Mixed signals stump home buyers
By Cao Qian |
June 18, 2010, Friday
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Print Edition
Print Edition
CLAIRE Zhang, a sales manager with a US manufacturing company in Shanghai, has been scouring the real estate market in Xuhui District this past month, looking for an apartment because she has to move out by mid-July from the small rental flat she now occupies.
Zhang, a Shanghai native in her early 30s who received a master's degree in the US and worked there for more than two years before returning to the city in 2009, isn't keen to move back in with her parents because they live on the city's outskirts and she would have long daily commutes to work.
"I've been checking apartments, both for sale and for lease," said Zhang. "However, I have no idea whether now is the right time to buy, so I am thinking of renting first and waiting to see how the housing market moves."
Zhang is not alone among young people confounded by high housing costs and expectations that prices may be about to come down as the government tries to rein in a property bubble by tightening credit.
Indeed, the housing market is showing signs of slowing, at least in numbers of transactions. Prices, however, have remained stubbornly high.
New home sales, excluding those designated for relocated residents under urban redevelopment plans, dropped 70 percent in May to 300,000 square meters, the lowest monthly volume since 2006, according to Shanghai Uwin Real Estate Information Services Co. The average price, however, eased month on month only 2.6 percent to 22,338 yuan (US$3,270) per square meter. That's still near a record high.
In Shanghai's existing home market, only about 6,500 sales deals were concluded last month, compared to 20,852 units sold in April. Home prices eased slightly, according to Shanghai Centaline Property Consultants Ltd, the city's biggest real estate chain with nearly 200 outlets.
"The past month has been very difficult for realtors because buyers seemed very hesitant to enter the market amid uncertainties," said Henry Wang, a senior branch manager at Shanghai Centaline. "Even in the districts of Putuo, Baoshan and Zhabei, where most people buy homes for themselves and not for investment, only three to four purchase deals, on average, were concluded at our outlets last month."
Centaline is more fortunate than smaller rivals because it has economies of size. That means realtors like Wang aren't worried about their jobs - yet.
Johnny Sze, managing director of Shanghai Hanyu Property Consulting Co, another major real estate chain operating more than 100 outlets in the city, said earlier that up to 4,000 realty firms in Shanghai could face a month of no sales at all. Ricky Tam, managing director of Shanghai Centaline, estimated earlier this month that as many as 200 smaller realty companies may have gone belly-up in May.
Operating costs for a small real estate operation in Shanghai are estimated at between 40,000 yuan and 50,000 yuan a month, but many of those businesses are lucky if they earn between 10,000 yuan and 20,000 yuan, industry analysts said.
Tight credit
In mid April, the central government raised the down-payment requirement on second home mortgages to at least 50 percent from 40 percent. The State Council, China's Cabinet, issued a notice directing banks to suspend housing credit to those buying third and beyond homes in an attempt to rein in speculators.
On June 4, Chinese authorities said banks should consider both the creditworthiness and home purchase records of people applying for mortgages. It was the first time China included home buying records in lending criteria, a move aimed at excluding those who pay for first homes with cash, then apply for mortgages on second homes.
The government wants to curtail investment in multiple properties for speculative purposes.
While Beijing, Guangzhou, Shenzhen, Qingdao and other large cities have all published guidelines to implement the stricter central government policies, Shanghai has yet to unveil the details of how it will act to curb housing speculation. That's contributing to the wait-and-see attitude of potential buyers.
"We are waiting for local guidelines to come out, and the sooner the better," said Shao Minghao, head of research at Hanyu Property. "It is very likely that a real estate tax, viewed as a major method to rein in speculation, might be introduced. If so, it's still too early to predict its impact on the city's housing market because it's all in the details about rates and how they might be levied."
Bargains
Zhang remains cautious.
"My realtor recommended a couple of apartments to me over the past few weeks and told me that the current asking price had already dropped by hundreds of thousands of yuan from a few months ago," said Zhang, who has her sights set on finding a mid-sized apartment in the price range of about 3 million yuan.
"But it's still hard to judge whether home prices will drop further or will simply bottom out where they are now," she added. "I'm waiting for clearer signals, but in the meantime, it's good to be out there checking the market because more homes seem to be available."
As of 6pm yesterday, the local stock of existing houses up for sale in Shanghai stood at 127,723 units, according to the city's official housing Website www.fangdi.com. That compared with 119,630 units on June 4 and 114,495 units on May 28.
Zhang, a Shanghai native in her early 30s who received a master's degree in the US and worked there for more than two years before returning to the city in 2009, isn't keen to move back in with her parents because they live on the city's outskirts and she would have long daily commutes to work.
"I've been checking apartments, both for sale and for lease," said Zhang. "However, I have no idea whether now is the right time to buy, so I am thinking of renting first and waiting to see how the housing market moves."
Zhang is not alone among young people confounded by high housing costs and expectations that prices may be about to come down as the government tries to rein in a property bubble by tightening credit.
Indeed, the housing market is showing signs of slowing, at least in numbers of transactions. Prices, however, have remained stubbornly high.
New home sales, excluding those designated for relocated residents under urban redevelopment plans, dropped 70 percent in May to 300,000 square meters, the lowest monthly volume since 2006, according to Shanghai Uwin Real Estate Information Services Co. The average price, however, eased month on month only 2.6 percent to 22,338 yuan (US$3,270) per square meter. That's still near a record high.
In Shanghai's existing home market, only about 6,500 sales deals were concluded last month, compared to 20,852 units sold in April. Home prices eased slightly, according to Shanghai Centaline Property Consultants Ltd, the city's biggest real estate chain with nearly 200 outlets.
"The past month has been very difficult for realtors because buyers seemed very hesitant to enter the market amid uncertainties," said Henry Wang, a senior branch manager at Shanghai Centaline. "Even in the districts of Putuo, Baoshan and Zhabei, where most people buy homes for themselves and not for investment, only three to four purchase deals, on average, were concluded at our outlets last month."
Centaline is more fortunate than smaller rivals because it has economies of size. That means realtors like Wang aren't worried about their jobs - yet.
Johnny Sze, managing director of Shanghai Hanyu Property Consulting Co, another major real estate chain operating more than 100 outlets in the city, said earlier that up to 4,000 realty firms in Shanghai could face a month of no sales at all. Ricky Tam, managing director of Shanghai Centaline, estimated earlier this month that as many as 200 smaller realty companies may have gone belly-up in May.
Operating costs for a small real estate operation in Shanghai are estimated at between 40,000 yuan and 50,000 yuan a month, but many of those businesses are lucky if they earn between 10,000 yuan and 20,000 yuan, industry analysts said.
Tight credit
In mid April, the central government raised the down-payment requirement on second home mortgages to at least 50 percent from 40 percent. The State Council, China's Cabinet, issued a notice directing banks to suspend housing credit to those buying third and beyond homes in an attempt to rein in speculators.
On June 4, Chinese authorities said banks should consider both the creditworthiness and home purchase records of people applying for mortgages. It was the first time China included home buying records in lending criteria, a move aimed at excluding those who pay for first homes with cash, then apply for mortgages on second homes.
The government wants to curtail investment in multiple properties for speculative purposes.
While Beijing, Guangzhou, Shenzhen, Qingdao and other large cities have all published guidelines to implement the stricter central government policies, Shanghai has yet to unveil the details of how it will act to curb housing speculation. That's contributing to the wait-and-see attitude of potential buyers.
"We are waiting for local guidelines to come out, and the sooner the better," said Shao Minghao, head of research at Hanyu Property. "It is very likely that a real estate tax, viewed as a major method to rein in speculation, might be introduced. If so, it's still too early to predict its impact on the city's housing market because it's all in the details about rates and how they might be levied."
Bargains
Zhang remains cautious.
"My realtor recommended a couple of apartments to me over the past few weeks and told me that the current asking price had already dropped by hundreds of thousands of yuan from a few months ago," said Zhang, who has her sights set on finding a mid-sized apartment in the price range of about 3 million yuan.
"But it's still hard to judge whether home prices will drop further or will simply bottom out where they are now," she added. "I'm waiting for clearer signals, but in the meantime, it's good to be out there checking the market because more homes seem to be available."
As of 6pm yesterday, the local stock of existing houses up for sale in Shanghai stood at 127,723 units, according to the city's official housing Website www.fangdi.com. That compared with 119,630 units on June 4 and 114,495 units on May 28.
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