Updated: 2005-07-28 06:13
The Chinese central government began to implement tough new measures to cool down the over-heated real estate market from June 1. China Daily is running a series of stories to discover the impact of these policies and how consumers and developers nationwide have responded to these policies. Reporter Bao Xinyan in Nanjing, capital of East China's Jiangsu Province, finds that house prices in the city are falling.
NANJING: The local government of Nanjing has introduced new policies to curb the real estate boom.
Under the policies, which took effect on June 1, buyers of top-range houses have to pay 4 per cent of the total price as tax.
Buyers of ordinary houses can still enjoy the original tax of 2 per cent. But their houses must meet three criteria - the floor-area ratio to the residential area must be at least 1.0, the floor area of an apartment must be no more than 144 square metres and the price must be no more than 1.44 times the average price in similar districts.
According to Guo Hongding, deputy director-general of Nanjing Real Estate Administration Bureau, approximately 20 per cent of the houses in the city are affected by this new policy.
People who have bought their house within the last two years will have to pay the tax for the total price at which their house is sold if they want to sell on.
For those who bought their house more than two years ago, they will only have to pay the tax for the increased value when they sell
As a result of the new policies, house prices have been falling slightly in the city, while the business of estate agents is stagnating as potential buyers wait and see whether the property market will cool down any further.
"Since last month, we have had very few potential buyers come through the door," said Wang Xin, who works at Eden Realty, part of a chain estate agents that has at least 10 branches in Nanjing.
Wang's branch is in Longjiang District, one of the most sought after areas in Nanjing, where the price of property is about 1,000 yuan (US$120) per square metre higher than the city average.
However, for the past several weeks, the branch has only sold one set of second-hand houses, whilst no new apartments have been sold.
"This is mainly because of the new real estate policies," Wang said. "People think that the government is taking measures to cool the overheated house prices, and they are waiting for a further decline in prices."
Wang has also come across another strange phenomenon. Some of those who want to sell their houses have increased the price.
"According to the new policies, some people have to pay extra tax on the sale of their houses, so they raise the price to offset the extra tax. But the problem is, nobody is buying anyway."
"Some have given up the idea of selling their house. Instead, they have chosen to rent them out."
According to Wang, the price of second-hand houses in the Longjiang District has dropped by 100 yuan (US$12) to 200 yuan (US$24) per square metre.
For example, Wang has just sold a second-hand house at a price of 6,100 yuan (US$ 735) per square metre. But, in March or April, the price for the same house was about 6,300 yuan (US$759) per square metre.
Statistics from websites dealing with the Nanjing property market show that the average price of houses sold in the city was 5,049 yuan (US$608) per square metre between January and May this year.
While measured from January to July 1, the average price was only 4,898 yuan (US$590) per square metre.
According to the local media, some property developers are waiting for house prices to rise again.
Many of them are simply keeping their new developments off the market in the hope that prices will rise again in the near future.
Members of staff at some estate agents have different opinions about the new policies' power as well as the price fluctuation.
Su Guoxiang of the development department of Nanjing Jicheng Real Estate Development Co Ltd thought that house prices would stop falling within three months after the government had instituted new policies.
"I think the price will be at most 200 yuan (US$24) or 300 yuan (US$36) per square metre lower than before," he said. "Also, I do not think that the price will rise sharply in the near future."
"The real effect of the new policies will be seen after more than one year," emphasized Lu Yao, one of Su's colleagues. "Since the real estate market is usually pretty slow to react to policy changes."
Many experts consider that house prices in Nanjing will neither rise nor drop greatly.
"Some experts say that there is a bubble in the real estate market in cities like Shanghai, this does not mean that Nanjing has also got a bubble. The two cities are different and their house prices cannot be compared," said Guo.
Hu Guanghui, director of Nanjing Real Estate Market Development Research Centre, estimated that house prices would not fall too low, but their growth rate would not exceed 10 per cent this year.
With experts offering different opinions on the property market, buyers are finding it very difficult to decide when to buy.
"I have no idea whether house prices will go up or down," said Chen Yiming, a 27-year old man who has got a monthly salary of about 5,000 yuan (US$617), which is pretty high in Nanjing. "In my opinion, the price is too high for ordinary citizens. I will wait and see, hoping that the price will fall to within a reasonable range," he said.
However, the new policies have produced little effect on small houses with low prices. Statistics show that in June, transactions of second-hand houses with a total price of less than 400,000 yuan (US$48,000) increased by 10 per cent, accounting for 72 per cent of the total sold.
While trading of houses with a total price of over 800,000 yuan (US$96,000) declined by 68.3 per cent, accounting for only 3.1 per cent of the total.
