Steep retreat last month for city's existing housing market

Shanghai's existing housing market posted a major retreat in February, as a series of administrative curbs coupled with the Spring Festival holiday damped sentiment.

Citywide, about 19,000 pre-owned homes changed hands last month, a drop of 57 percent from January, Shanghai Homelink Real Estate Agency said in its latest monthly report.

In February, existing homes sold for an average of just over 40,000 yuan (US$6,147) per square meter, or 3.32 million yuan per unit, a decline of 8 percent from January.

By value, existing homes worth a total of 63.1 billion yuan were sold, a month-over-month plunge of 61 percent.

"Tightening measures introduced recently by both the central and local governments proved to be effective in cooling down the overheated residential market, which suffered notable withdrawals in almost all aspects," said Yang Yulei, a senior analyst with Homelink. "Wait-and-see sentiment seemed to prevail, and the average price of existing homes located beyond the Suburban Ring even fell on a year-on-year basis."

Physical viewings handled by Homelink, for instance, fell 44 percent in February from a month earlier, while the number of new clients also increased at a slower pace, according to Yang.

Citywide, Nanqiao in Fengxian District, the core area of Jiading District and Zhoukang in the Pudong New Area were the most sought-after areas among pre-owned home seekers last month, with sales of 599, 475 and 456 homes respectively, according to Homelink. Over the first two months of 2021, about 63,000 existing homes, with a total value of 224.1 billion yuan, were sold across the city. The average price of these homes was 3.53 million yuan, or 42,508 yuan per square meter.

The government imposed regulatory caps on banks' exposure to the property sector and mortgage loans for the first time to prevent systemic risks. 

Effective on January 1, loans to real estate developers were capped at 40 percent for large state-owned lenders, while banks' mortgage lending can be no more than 32.5 percent of their outstanding credit.

On January 21, Shanghai stepped up efforts to crack down on people seeking access to home purchases or mortgage loans through fake divorces, and imposed a capital gains tax on the total sales price of a property if sold within five years of purchase, up from the previous two-year threshold.

In late February, news on the implementation of a new centralized land sale initiative was reported by various media outlets around the country, citing a notice from the Ministry of Natural Resources. According to the government plan, 22 cities, including Beijing, Shanghai and Shenzhen, will limit the number of land sales this year to three times, while raising supply for bidding at each auction, a move that might help ease home price growth by forcing developers to curb spending sprees, according to analysts.