China's Real Estate Market Slows Down Amid Government Policies

China's previously booming real estate market has entered a cooldown phase since the government introduced a property business tax from June 1. The tax, which ranges from 5.5% to 5.5%, has caused both buyers and sellers to hold back from making new deals. Sellers are seeking to protect their profits, while buyers are waiting to see how the market adjusts. A joint investigation team's report on the government's macro-control policies has yet to be released, but preliminary surveys suggest the property sector is no longer as hot as it once was.

Key Takeaways:

• The government's real estate policies have been successful in slowing down the property market, with the increasing speed of investment in real estate development in the first five months slowing down by 2.3% from the first quarter.
• The number of luxury residential houses sold has dramatically decreased, with turnover in 16 big cities registering negative growth in the first five months of this year.
• The national average house price maintained moderate growth, with the speed at which prices rise falling 1.6% in the first five months compared to the first four months.
• Real estate speculation and investment have almost stopped, and demand is becoming more reasonable.
• Prominent real estate developer Pan Shiyi reported a 70% fall in turnover from his Beijing projects in May.
• Property turnover in Shanghai plummeted by 80% in the second quarter from the first quarter.
• Experts predict that house prices may fall more in Yangtze River Delta cities, such as Shanghai and Hangzhou, due to an oversupply of housing.
• Local governments' joint efforts are needed to maintain a healthy real estate market, as income from land sales and real estate tax are significant sources of revenue for them.
• Zhang Yan, a real estate analyst at China Securities, noted that the central government's measures can be effective only with the support of local governments.

Statistics:

• 2.3%: The decrease in the increasing speed of investment in real estate development in the first five months from the first quarter.
• 80%: The decrease in property turnover in Shanghai in the second quarter from the first quarter.
• 70%: The fall in turnover from Pan Shiyi's Beijing projects in May.
• 80%: The decrease in property turnover in Shanghai in the second quarter from the first quarter.
• 10-30%: The predicted decrease in house prices in Yangtze River Delta cities due to an oversupply of housing.
• 910 billion yuan (US$110 billion): The amount received by local governments from land sales between 2001 and 2003.

Sources:

• State Administration of Taxation
• National Bureau of Statistics of China (NBS)
• CITIC Securities
• China Securities
• Shanghai Real Estate Trade Association
• Xinhua News Agency