Buyer sentiment wanes as house market hit by regulatory measures

Sales of existing homes retreated in Shanghai last month as a slew of measures introduced lately to cool down the market started to dampen buyer sentiment.

Across the city, about 24,000 pre-owned homes changed hands in July, a month-over-month drop of 15 percent, Shanghai Homelink Real Estate Agency said in its regular monthly report.

By value, existing homes worth a total of 81.9 billion yuan (US$12.6 billion) were sold, a decrease of 13 percent from June.

Existing homes sold for an average of 3.43 million yuan, up 2 percent from June.

"July's volume was the second lowest so far this year, outperforming only February which was mainly affected by the Spring Festival holiday," said Yang Yulei, a senior analyst with Homelink. 

"The latest introduction of property-related measures, including verification of pre-owned homes' list price, has definitely left some impact on home seekers' expectations for the market."

Shanghai Housing Administration Bureau announced on July 9 that the list price of every pre-owned home must be verified by the local industry watchdog. Any listing that failed to pass the check, which is based on the normal range, cannot be made public.

As a result, the list price of existing homes on Homelink outlets fell an average 8 percent from June, with some home owners proposing price cuts themselves.

Two weeks later on July 23, Shanghai's housing authority issued a notice outlining strengthened regulations on property gifting to improve the effectiveness of restrictions on home purchases. 

Under the new rule, home purchase restrictions imposed on a granter of property gifting will now remain in place for five years after the property title is transferred to a grantee. Previously, property gifting had been used to circumvent existing home purchase restrictions.

And one day after that, Shanghai also raised mortgage rates for non-first-time buyers to 5.7 percent from 5.25 percent. 

"All these measures are aimed at stabilizing the housing market and should work together to affect transaction volume in the coming month," Yang said. "Property-viewing arrangements handled by Homelink, for instance, fell 16 percent in July, shrinking for the second consecutive month."

Citywide, Nanqiao in Fengxian District, Huinan and Zhoukang, both in the Pudong New Area, were the most sought-after locations among pre-owned home seekers, with sales of 806, 675 and 560 homes respectively, according to Homelink.

In the first seven months of 2021, about 204,000 existing homes, with a total value of 687.6 billion yuan, were sold across the city, up 46 percent and 54 percent from same period a year ago. The average price of these homes was 3.37 million yuan, an increase of 6 percent year on year.

A separate report released earlier by Shanghai Centaline Property showed that new home sales, excluding government-subsidized affordable housing, fell 25.5 percent from June to 802,000 square meters in July, despite continuously robust new supply. 

Some 1.17 million square meters of new residential properties were rolled out into the market, up 0.5 percent from the previous month.