Chinese Take Away


In recent years, Chinese officials have tightened financing to developers and rules on lending for home buyers in an effort to cool a buying frenzy and runaway prices. The government has delivered a consistent message: Apartments are for living, not for speculation.

Price increases across the country have slowed and at least in some large cities, prices have even dropped. Some of those who have pooled their life savings to become homeowners are now finding it wasn’t the sure-bet investment they thought.

At the sales centre of property developer, Sunac China Holdings Ltd. in Tianjin, buyers crowded around a customer service representative demanding to know why the company had substantially lowered sales prices. The previous weekend, a protest erupted outside the developer’s showroom, one of several over falling house prices in recent weeks.

In Tianjin, average existing property prices have fallen for three consecutive months in a month-over-month basis, according to estimates by Shanghai-based research firm E-House China R&D Institute. Prices in Beijing and other large cities, such as Guangzhou in the south, have dropped. In China as a whole, home prices are still rising but at a much slower pace.

The government’s attempts to stop speculative property-buying long fell on deaf ears in a country used to steady price rises, and where wealth accumulation has come overwhelmingly from real-estate gains. In China, "housing is a financial product," said Zhang Dawei, an analyst based in Beijing for Hong Kong-based property agency Centaline. "The more prices rise, the more demand you get."

It is far too early to say whether the property market as a whole has peaked. An official survey of average home prices in 70 Chinese cities showed existing-home prices rising 4.6% in September compared with a year earlier, a healthy rate though lower than August’s 5.3% year-over-year gain.

Nonetheless, Sun Yue, a real-estate agent at Beijing-based Century 21 Global, says that some Beijing homeowners have slashed their asking prices by 10% or more to attract buyers. Mr. Sun expects prices to fall for another several months, but to then start rising again.

Chinese leaders want prices to stabilize, not rising too much but also not to fall too quickly. At a Politburo meeting in July, policy makers pledged not to ease property controls for fear of driving up speculation and household debt. Instead, they have hoped the existing restrictions would slowly restore calm in the market.

Faced with cooling home prices and the prospect of social instability, some regional governments, including Nanjing and Tianjin, have moved to tweak restrictions in hopes of boosting the market again. Local governments have their own incentives to prop up the property market, since many have leaned heavily on land sales to meet economic-growth targets.



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