Shenzhen finally puts squeeze on
speculators By Olivia Chung
HONG KONG - As its housing prices continue
to skyrocket, the Shenzhen municipal government
has finally begun to implement regulations to
restrict overseas homeowners one year after it was
officially announced by the central government in
Beijing.
Shenzhen, a once-obscure fishing
village that borders the Hong Kong Special
Administrative Region (SAR) in southern China's
Guangdong province, was the first special economic
zone (SEZ) decreed by Deng Xiaoping. Now popularly
described as a "boom
town", this city of 11
million has the highest housing prices in mainland
China, a country where real-estate prices in
general have been steadily rising for almost three
years.
There are concerns that "hot money"
by overseas investors has fueled much of the
housing speculation. Housing prices in the
mainland's 70 major cities have experienced an
average monthly growth rate of about 6% year on
year since the beginning of 2006. Six
central-government departments, including the
Ministry of Construction and the People's Bank of
China, issued a series of new policies last July
24 to restrict foreign investment in housing.
Under the policies, foreigners are not
allowed to buy homes until they have lived in
mainland China for at least a year, and they are
limited to one residential unit for personal use.
People from Hong Kong, Macau and Taiwan are not
required to abide by the one-year-residency
requirement, but are still restricted to one unit
for personal use.
Many mainland cities,
however, have been slow to implement the measures,
with Beijing and Shanghai two of the few that
promptly adhered to the new restrictions. There is
an ancient Chinese saying, "The mountains are high
and the emperor is far away," which well describes
how a central policy can still be ignored, delayed
or simply dodged by the municipal and regional
governments in this vast country.
Recent
circumstances in Shenzhen, however, have finally
forced the municipal government to act. On July
10, it announced that the regulations on home
ownership by non-mainlanders would be effective
immediately.
According to the National
Development and Reform Commission (NDRC), property
prices among China's 70 large and medium-sized
cities jumped by 6.4% year on year in May, the
highest monthly increase since last year. Among
the first-tier cities, Shenzhen recorded the
highest growth in prices of new residential
properties, with a 12.3% rise in May.
Based on Shenzhen's official figures, the
average price of new homes reached 14,223 yuan
(US$1,881) per square meter in May - a 22%
increase over April, and an increase of 51.57%
from the average price of 9,384 yuan per square
meter for the whole of 2006. And inside an urban
area that separates Shenzhen's SEZ from the rest
of the mainland, the average price exceeded 20,000
yuan per square meter.
Because Shenzhen
has been targeted by central government officials
for leading the nation in property-price
increases, a senior Shenzhen government official
was quoted by last week's Nanfang Weekly as saying
property prices are "the biggest political problem
in Shenzhen".
Andy Lee, general manager at
Centaline China's Shenzhen branch, said a
property-price bubble has been growing in Shenzhen
since speculators jumped into the real-estate
market two years ago. "The city saw more capital
flowing into its property market in the first five
months of this year, partly due to the
stock-market investors who have put profits from
stock investments into property speculation," he
said.
Lee said transactions in the
second-hand residential market in Shenzhen reached
about 5 million square meters in the first five
months of this year compared with more than 7
million square meters for the whole of last year.
He said 3.1 million square meters of new
properties changed hands in the same five months,
compared with 7 million square meters for all of
2006.
"The sudden growth in transaction
volumes in the city's second-hand-property market
is not in line with the slow growth of the city's
population and domestic income," he said. "The
speculation is and will be more serious in the
city's second-hand-property market than the
first-hand. That is because the new housing supply
has been gradually dropping due to limited space
and residents' resistance to urban renewal."
Catherine Jiang, a purchasing agent and
part-time reporter living in Shenzhen, is proud of
the 80-square-meter apartment she bought three
years ago. The price of her two-room apartment in
the city's western Nanshan district recently rose
at least three times to about 25,000 yuan per
square meter from 7,000 yuan in 2004.
She
attributed the property price surge to her
apartment's relatively close proximity to Hong
Kong and the fact that SAR residents have been
among the biggest investors in her area. She also
cited the expansion of Shenzhen's subway system to
her neighborhood, and her apartment's proximity to
several large business and high-tech areas. The
newly opened Hong Kong-Shenzhen Western Corridor
highway bridge is another plus for cross-border
travelers, she said. Formerly it was a
60-90-minute commute from her neighborhood to the
SAR. With the new corridor route, the trip has
been cut to 20 minutes.
"As the property
prices keep growing everywhere in Shenzhen, I will
not sell my flat until one day I move out of the
city," she said. She said she received phone calls
from property agents once a week in May
encouraging her to sell her place. Jiang said she
expects the price of her apartment to continue to
rise despite the local government's attempts to to
halt property speculation.
Lee said that
in addition to the measures restricting foreign
buyers, other government attempts to quell the
housing boom are pending, some of which have
already dampened investors' appetite for the
market.
For example, an online system for
used-house transactions that is aimed at improving
market transparency will be launched next month. A
5% tax on property purchases will also be imposed
on a citywide scale, after a small-scale tax plan
that was introduced in Shenzhen's Longgang
district one year ago.
According to Lee's
estimates, the city's property-transaction volume
his company handled has fallen sharply, at only 50
units per day during the past two weeks (July
1-14). In comparison, the transaction volume was
100 units per day during the peak period from May
to June, up from more than 70 units per day in
March and April.
Given that Hong Kong
speculators account for only 1-2% of all Shenzhen
property buyers, the impact of the measures
restricting SAR people to one unit will be
negligible, Lee said. "But local speculators whom
I know are also taking a wait-and-see approach,"
he said. He added that about 10-15% of Shenzhen
property buyers are speculators and most of them
are already residents of Shenzhen.
The
implementation of the one-unit limit has brought a
pause in the housing boom by Hong Kong
speculators, according to a pro-Beijing newspaper
in the SAR. Just prior to the rule's enforcement,
it reported that the number of Shenzhen properties
bought by Hong Kong residents had recently risen
to 25% of the total, up from 11% a year ago. The
story implied that the new measure was
specifically targeting Hong Kong speculators.
No sooner did the news report come out
than a spokesman for the Shenzhen Bureau of Land
Resources and Housing Management rebuffed it. He
claimed property purchases by Hong Kong residents
accounted for only about 9% of the total in recent
years.
"There is no correlation between the
Hong Kong buyers and the regulation," he said. "We
actually planned to launch it in June, but it was
delayed." He declined to cite a reason for the
delay.
Olivia Chung is a senior
Asia Times Online reporter.
(Copyright
2007 Asia Times Online Ltd. All rights reserved.
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