Curbs on new pre-sales reduced in some Chinese cities

Hong Kong

THE local authorities running several major Chinese cities have begun to ease restrictions on pre-sales of new apartment buildings, and are in some cases for the first time in about a year allowing developers to raise prices slightly.

The loosening in cities such as Shanghai, Hangzhou, Nanjing and Xiamen has led to a surge in the marketing of new home developments over the past two months, with developers also eager to ramp up the launches to boost their cashflow.

"Both factors will lead to an obvious rise in housing supply in the top cities in the second quarter," said David Hong, the Hong Kong head of research at CRIC, a real estate research firm.

"Many developments which have already reached the pre-sales requirements last year will be launched into the market."

Pre-sales refer to the selling of homes in housing developments before they are ready to occupy, and often before the construction has been completed.

The changes highlight competing interests between China's stability-minded central government and revenue-hungry local authorities, as well as the challenges in artificially containing a still hot market that has remained a one-way bet.

The mild loosening is city specific, according to nine developers interviewed by Reuters, and there is little expectation of a nationwide easing in curbs anytime soon.

For example, developers said, pre-sale approvals remain extremely strict in Beijing because it is closely monitored by the central government.

But real estate specialists said that it could be a sign of things to come elsewhere in the country as the cities, relying heavily on land sales and property taxes, try to boost real estate sales and keep housing supply in line with demand.

Any relaxation should bolster the developers' profitability and could help to support economic growth at a time when there are fears that it could be flagging, though if it is restricted to only a few cities the impact will be modest, economists and analysts said.

The pent-up demand for land development is high as Chinese cities sold a record 5.2 trillion yuan (S$1 trillion) worth of land usage rights in 2017, up 40.7 per cent from a year earlier, data from the finance ministry shows.

The official Xinhua news agency reported last week that the Ministry of Housing and Urban-Rural Development has reiterated that policies to control home prices and prevent speculative investment in the property market will not be changed or loosened.

The latest housing price data for March shows that average new home prices rose for their 35th consecutive month, with more cities reporting growth, though the annual price appreciation has dropped to 4.9 per cent in the latest period from a record 12.6 per cent in November 2016. The next monthly figures, for April, are due out on Wednesday.

But China's official housing data has been criticised for being artificial - local authorities can have an impact on the figures by setting price caps and changing home sales and purchase approval speed so that they are not seen to be undermining Beijing's policies.

"To stabilise prices, the local government has been delaying approvals for expensive projects until there are enough cheaper projects to offset such price gains," said a government source in Hefei, the capital city of Anhui province, who declined to be named because of the sensitivity of the issue. REUTERS