Homebuyers bide their time as gov't cools housing market
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Wu Hao was not worried when he heard about the government's new measures to cool the Chinese property market -- even though he bought his 55-square-meter Beijing apartment only last year.
"I would love to see a price decline, and then I could buy another apartment. But I don't think prices will fall much. There is just so many people out there in need of a new apartment," he said.
The Chinese government is working hard to rein in soaring home prices after they rose by a record 11.7 percent in March in 70 major Chinese cities.
In the past month, the government introduced a raft of tough measures: more restrictive down-payment requirements; higher interest rates; a ban on lending for third home purchases; and increased scrutiny of developers' financing.
But with most of the measures focused on cracking down on speculation in the real estate market, people are wondering whether prices will still rise.
Strong rigid demand
"I think the demand is quite strong," Wu said, recalling his experiences buying his apartment.
After working for five years at an advertising agency, Wu bought his apartment last year with a 30 percent downpayment just before the government took its first step to curb rocketing property market prices.
"If I had hesitated for more than half an hour, I would not have got this apartment. There were few choices I could afford," he said.
Tang Linyun, 27, works in the local government and lives with her parents in Hangzhou, capital city of eastern China's Zhejiang Province. She has just changed her mind and decided to not buy an apartment for herself.
"I think I should wait until the market trend is clearer," she said. But she doesn't think prices will decline much, especially because so many people around her are planning to buy.
But even as trading volume in housing falls in the wake of the latest government measures, prices have held steady.
Data from the China Index Research Institute showed that Hangzhou saw a 72.55 percent month-on-month plunge in the area of properties sold during the week ending April 25. The area of housing sold in Beijing dropped 45 percent while in Shanghai the fall was 38 percent.
People are expecting home prices to fall, but such expectations will not last for long, Yuan Gangming, a research fellow with Beijing-based Tsinghua University, said.
Last year's buying spree may return and push prices to an even higher level, he said.
Liu Mingkang, chairman of China Banking Regulatory Commission, the country's banking regulator, said last month while attending the annual Boao Forum there would not be much change in China's property market, due to the large labor flows that bring strong demand.
There are other views too.
Zhang Jun, a researcher with Centaline Property Agency, said during last year's buying spree, 30 percent of the buyers were looking for a better place to live while 60 percent were buying as an investment. The rest was real demand.
As the government curbs squeeze the bubble, prices will definitely fall to a more reasonable level, Zhang said.
A better solution
Zhang Hanya, a senior researcher at the National Development and Reform Commission, said the government has to do more than just crack down on speculative buying.
"The new measures may stop home prices surging for a while, but the government cannot simply set stricter requirements to stop people buying new homes," he said.
Zhang thinks the government should provide more affordable housing and give buyers a choice other than expensive, luxurious places.
Building a "multi-level housing supply system" with low-rent housing, affordable homes, and commercial residential housing, is the key to solving the property market problem, Zhang said.
The Chinese government plans to spend 63.2 billion yuan on low-income housing this year, an increase of 8.1 billion yuan over 2009, according to a government work report delivered at the annual parliamentary session in March.
In Qingdao - an eastern China coastal city listed as one of the six Chinese cities with property bubbles - the government promised to provide 16,000 affordable homes over the next two years.
Meanwhile, the government of Nanjing, capital city of eastern Jiangsu Province, has strengthened regulations concerning affordable housing, even taking back cheap homes bought by families not meeting the conditions the government set.
"It is good to know the government is making efforts to provide us with more choices. I really don't want to choose between expensive apartments and even more expensive ones anymore. It's torture," said Tang Linyun.
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