It vows to punish developers that create artificial supply shortages
China has ordered developers not to take deposits for sales of uncompleted apartments without proper approval and barred them from charging ‘abnormally high’ prices, stepping up efforts to prevent a property bubble.
Developers must disclose to the public all apartments available and prices, and start selling within 10 days of getting pre-sale approval, the Ministry of Housing and Urban-Rural Development said on its website yesterday. It vowed to punish developers that ‘artificially’ created supply shortages.
The focus on developers’ sales tactics adds to curbs on loans for third- home purchases, increased downpayment requirements and higher mortgage rates announced in the past week. China’s Cabinet has said that stricter measures to control speculation are needed after property prices in 70 cities jumped a record 11.7 per cent in March.
‘It will have some impact curbing prices if implemented effectively,’ said Li Shaoming, a Beijing-based analyst at China Jianyin Investment Securities Co. ‘Tax policies may follow if those measure fail to produce evident effects.’
Developers who fail to start selling within the required time, price homes at ‘abnormally high’ levels, or ‘artificially’ create supply shortages by faking sale contracts, will be ‘severely’ punished, according to the statement. The government has repeatedly said that developers can’t hoard land or intentionally delay sales to speculate on further price gains.
Agents are banned from practices including spreading false information and hyping up sales by hiring people to pretend they are buyers, the statement said. Such practices ‘pushed the waves’ in the rapid property price gains, Ms Li said.
The requirement that developers must disclose prices of all apartments and start to sell in 10 days of obtaining pre-sale approval is likely to cool prices should it be implemented properly, she said.
Developers tend to control the pace of supply and reserve some apartments, possibly in better locations, to sell at higher prices later, she added.
Local regulators must grant pre-sale approval to at least one entire building rather than some units or floors, according to the statement. Buyers’ names can’t be changed after the subscriptions, the statement said.
Chinese banks should stop loans for third-home purchases and suspend lending to buyers who can’t provide tax returns or provide proof of social security contributions, the State Council, the nation’s Cabinet, said in an April 17 statement. Local governments can limit the number of units that can be bought, while senior officials will be held responsible for failing to stabilise property prices, the statement said.
Two days earlier, the government raised mortgage rates and downpayment ratios for second home purchases after the record jump in home prices in March. Buyers purchasing their second homes must pay at least a 50 per cent deposit, up from 40 per cent, and interest rates should be at least 1.1 times benchmark rates, the State Council said in an April 15 statement.
Jun Ma, Deutsche Bank AG’s Greater China chief economist, branded the moves the ‘the most draconian measures on the property market in history’.
Haikou, Sanya Haikou and Sanya, cities on the southern island of Hainan, led the 70 cities that posted the biggest jumps in property prices in March. Overall real estate prices in Haikou, Hainan’s capital city, jumped 53.9 per cent, while Sanya, which has hosted the Miss World beauty pageant, followed with a 52.1 per cent increase, the National Bureau of Statistics said on April 14.
Hedge fund manager James Chanos warned in an interview this month that China’s property market is in a bubble that may burst as early as this year.
The country is ‘on a treadmill to hell’, according to Mr Chanos, who said in January that the nation is Dubai times a thousand. ‘They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.’
Source: Business Times, 20 Apr 2010