Economy

Tough rules set to drop home prices 30%

By Xu Fan (China Daily)
Updated: 2010-05-03 11:15

New restrictions kick in over weekend

Home prices may drop by as much as 30 percent by the end of this year in Beijing, following the introduction of tough new rules that among other things ban families from buying more than one additional home.

In addition, non-locals are not allowed to buy an additional home unless they have worked in Beijing for a year, the government says.

Regulations released on Sunday showed that buyers now have to disclose all information about their family, including their children's marital situation as well as how many homes they own, before signing contracts.

Buyers who are caught not disclosing their true situation would have their contract rescinded, the city's municipal commission of housing and urban-rural development said.

These rules are part of the central government's move to curb housing speculation and soaring prices.

Zhang Dawei, director of the research department at Centaline Property Agency Ltd, said that while he expected Beijing home prices to drop by 30 percent, the effects on some outer suburbs may not be as bad and may see a reduction of between 10 and 15 percent.

"We also expect that in the next three months, about 50 percent of speculators may start underselling homes," Zhang said.

Pan Shiyi, chairman of the high-end real estate company SOHO China, said the policy had been the strictest in the capital's history.

"I've been surprised to hear that a family is allowed to buy only one more home as it has been common for families to purchase several apartments," he said.

Pan said the policy should reduce demand for homes and stop the rapid rise in housing prices.

Qi Fan, an analyst with the US real estate brokerage firm Century 21, said the policy may create a huge drop in trading volumes this month.

"The worst prediction is that the number of homes sold may fall down by 50 percent, compared with the same period last year," Qi said.

Property developers may also suspend projects in a move to reduce their risk in a contracting market, he said.

Chen Zhi, assistant secretary general with the Beijing Real Estate Association, felt that the new policy may last two or three years.

He also thinks the government may introduce tougher rules, such as property taxes, in the second half of this year.

However, the new policy has yet to have an impact on home prices in urban areas.

But a heated debate has already started on real estate forums such as newsmth.net.

One person said he visited 10 new projects from the West Third Ring Road to West Sixth Ring Roads on Saturday.

"Some of these projects have no restriction to non-local buyers, despite the policy that said such people needed to provide prove they had been working in Beijing for one year," he said.

"In addition, almost all sellers said they found it hard to verify if a family is buying more than one additional home."