The government's measures to curb property speculation have apparently begun to bear fruit in Hangzhou.

In this capital city of east China's Zhejiang Province, real estate climate indices slipped sharply in the second quarter of the year, according to the latest report from the Zhejiang Provincial Bureau of Statistics.

And slack business has even led to the closure of many middle-and-small sized estate agents which have not clinched a deal for weeks.

Two indices dropped to an all-time low since 1999. The developers' confidence index tumbled to 99.7 points, a decline of 37 points on the same period last year, while the commercial housing price climate index dropped 35.8 points from the same period a year ago.

Prices have stopped soaring and property speculation has cooled since the government's measures took effect on June 1, said Jia Shenghua, director of the Real Estate Research Centre under the Zhejiang University.

More and more people are looking for a stable property market, taking a wait-and-see attitude towards buying a home, Jia told China Daily.

"The property market in Hangzhou is now in a stalemate situation. Developers and speculators are waiting for possible price rises while buyers are looking on from the sidelines," said Jia.

"Once sellers cannot put up with the deadlock, they will give in and prices will go down."

The obvious and direct impact of the government's measures is the reducing number of housing transactions, Jia added.

Sales of new homes in Hangzhou, including eight urban districts, fell to 818 in June, compared to 926 in May, according to statistics from the Hangzhou Transparent Property Sales Website, the biggest local Internet portal on property sales.

The average transaction price fell to 7,440 yuan (US$896.4) per square metre in June, 1,094 yuan (US$131.8) lower than May and 1,786 yuan (US$215.2) lower than March.

Property developers have begun to put homes on the market at discounted prices to try to attract customers.

Zhang Xi, 38, who wanted to buy an apartment in Hangzhou earlier this year to end his family's renting history, is among the potential buyers waiting for possible price slashing.

Zhang heard of a new development through friends and put his name down for an apartment in January; at that time all new projects were hotly pursued by buyers. The project was planned to be put up for public sale in June.

However, in late June Zhang was invited to buy the apartment with a 5 percent discount, as only 30 percent of the new project had been sold.

"It was totally impossible to get a discount in the past. Now even salesclerks are more amiable than before," said Zhang.

However, Zhang did not make a deal with the developer as he thought there might be more opportunities in the near future.

Property agents said the strong measures aimed at clamping down on property speculation have effectively curbed skyrocketing prices and affected the sale of the second-hand market.

The sale of second-hand houses shrank very low between June 1 and 15 but began to rise after that, according to Ye Hongwei, vice-president of Century 21 (Hangzhou Region), a leading local property agent.

After a period of getting used to the policy in the first half of June, the public began to realize the government is trying to stabilize property prices, said Ye.

Moreover, the supply of homes for rent is on the up. Speculators who were unable to sell up before June 1 are now trying to rent their properties out in the hope of using the rental income to cover the costs of their mortgages, Ye added.

However, Ye predicted that the real estate sector in Hangzhou would rebound in October with transactions reaching 70-80 percent of the same period last year.

Experts suggested the government should not relax its present macro-control measures in order to avoid a possible rebound.

In its latest move, the central government took eight measures including the introduction of specific tax policies to calm down the overheated real estate sector.

"The government should convince everybody that the bonanza period for investing in property no longer exists," said Jia Shenghua.

Policy-makers need to carry out new tightening measures to further curb property speculation; for example, higher property tax should be imposed to increase speculators' costs, Jia added.

However, it is impossible for every family to buy a home because of the underlying imbalance between supply and demand in the property sector, even in a stable market.

Jia attributed the imbalance to a limited supply of land, residents' strong desire to buy private homes, and the rapid pace of urbanization.

(China Daily July 27, 2005)