ALBERT Li, a nine-year veteran in the real estate industry, said February was probably one of the "coldest" months he could remember since moving to Shanghai from Xi'an, capital of northwest China's Shaanxi Province, after graduating from university.

Though Shanghai has seen some of the coldest weather in three decades this season, Li wasn't referring to the chill factor. He was talking about his industry.

"Revenue in my office plunged by around 70 percent from January, as home buying went into a deep freeze after the government announced further measures to rein in property prices," the 35-year-old said.

Li is responsible for day-to-day operations at a Century 21 China Real Estate branch in downtown Jing'an District. More than 10 staff members are employed in his office.

"As far as I can see, the local market won't make any noticeable recovery until the second half of this year," he lamented.

Slump in business

Li's woes are shared across the industry, with property agents all complaining about a slump in business. In January, the central government intensified its effort to stop what it considers a bubble driven by speculative buyers more interested in profit than a roof over their heads.

On January 26, the State Council, China's Cabinet, added eight new measures to its arsenal, including an increase in mortgage down payments for second houses, a ban on locals purchasing third or more homes and a ban on newer residents to the city buying beyond one home.

Just one day later, Shanghai launched its long-anticipated property tax pilot project, imposing a rate of 0.4 percent or 0.6 percent on newly purchased homes, depending on per square meter price of the property.

And in a very prompt response to the central government's directive, Shanghai released details for local implementation of the tightened rules - one of the first cities in the country to do so.

Effective last month, buyers of second homes who get loans from either commercial banks or the city's public housing fund should put down 60 percent of the price, compared with the previous 50 percent, and interest rates on those loans are set at 10 percentage points above the basic rate.

Moreover, local families who already own two or more houses and families without residence cards who have one home in the city are banned from buying any more units.

Those without permit are also required to present tax or social insurance certificates to show that they have resided in the city for a cumulative 12 months over the past two years if they want to purchase a home.

Anyone still eligible to buy a home is restricted to one purchase.

The government is also requiring that full transaction tax be charged for residential properties sold within five years of purchase. If an "ordinary" home is occupied for more than five years, no transaction tax is levied. An "ordinary" home is defined by the government as one no larger than 140 square meters, and priced between 980,000 yuan (US$150,000) and 2.45 million yuan, depending on proximity to central Shanghai.

"The latest crackdown is very different from earlier government measures, most of which were designed to raise the cost for home buyers to curb speculation," said Song Huiyong, research director at Shanghai Centaline Property Consultants Ltd, operator of the city's largest estate chain in terms of transaction value.

"The latest policies seem extremely tough and immediately disqualified many people who were planning to purchase units," Song said. "It has really dealt a heavy blow to the local housing market."

Across the city, only about 5,000 sales contracts of existing homes were probably signed in February, compared with more than 20,000 contracts registered a month earlier, industry analysts predict.

February figures have yet to be released.

Johnny Sze, managing director at Shanghai Hanyu Property Consulting Co, another major estate chain in the city, with a local network of more than 100 branches, said last week that he believes sales of existing homes may have plummeted by as much as 70 percent in February from January. On a year-on-year basis, the decline would be about 10 percent.

January, a traditionally low month for home sales, saw a burst of buying this year as would-be homeowners raced to snap up properties before the tighter measures and property tax came into effect.

Government crackdown

One thing is certain, the government crackdown is threatening the livelihood of the local real estate industry. Some smaller property agencies may even be forced out of business.

"Almost all of my staff suffered an income drop of around 70 percent in February," Li said. "But as far as I know, the majority of industry players, especially the big companies, should be able to withstand this downturn for another few months. For smaller firms, like those run by husband and wife teams, I'm not so sure."

The average monthly cost of operating a standard-size real estate agency is between 100,000 yuan and 200,000 yuan in Shanghai. To break even, agents need to seal at least a few sales deals, even though most agencies do derive their income from managing rental properties.

"Before the latest government crackdown, home sales deals typically accounted for 25 percent of our business, but that has plunged to around 10 percent," said Wang Weili, who has been working for a mid-sized realty agency on Kaixuan Road in Changning District for nearly two years. "We've been trying hard to do more rental business to cover high operating costs. And we have been trying to concentrate more on the lower end of the housing market, which seems to have been less affected by the crackdown."

That's probably a wise strategy during such tough times.

At the branch where Li works, for instance, the majority of homes - about 70 to 80 percent - sold over the past month cost between 1 million yuan and 2 million yuan. That compared with just a few months back when such modest price tags comprised only between 10 and 20 percent of business.

"High-end homes have been suffering the most in this new market reality because the majority of those wealthier buyers already own more than one unit," Li said.

He added ruefully: "The new measures will probably last for some time, so we in the industry have to hunker down for tough times."