Guangzhou property market hit by double whammy of tightened policies, outbreak of Covid-19's delta variant

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June 17, 2021 1:44 AM SGT

Guangzhou's property market has been hit hard by tightened policies aimed at cooling real estate prices, and an outbreak of the more infectious delta variant of Covid-19.

The provincial capital of Guangdong and one of the cities in the Greater Bay Area cluster reported a slump in both home sales and viewings in the second quarter, traditionally a high season for transactions of residential property. Sales so far this month have fallen 77.9 per cent to 2,090 transactions, compared with the same period last year. The slowdown was stark compared with February, when the transaction volume surged 427 per cent from a year ago.

"The recent Covid-19 flare-up has magnified the effect of tightened property policies," said Xiao Wenxiao, Guangzhou chief analyst at consultancy China Real Estate Information Corporation (CRIC).

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City authorities have stepped up the pace of new regulations, frequently issuing new policies since April, after the central government in Beijing named and shamed Guangzhou along with four other cities and ordered them to take action to stabilise the price of land and houses, as well as market expectations. China is keen on preventing any systematic risks in its highly geared property sector from leaking into its financial sector. As a result, Guangzhou launched a three-month campaign mid-April to clamp down on illegal practices and 18 problems in the local market.

"The new policies have weighed down investment sentiment," said Cheng Jieling, a senior property analyst at 58 Anjuke Real Estate Research Institute, a Shanghai-based property research firm. These also hurt demand from people who have a genuine need for housing, through tighter reviews of sources of loans for property purchases, she said.

Before the policies took effect in April, Guangzhou's home prices rose 9.9 per cent from a year ago, and the city of 18 million people ranked fourth among all Chinese cities, according to the most recent official data. The city was receiving the spillover from Shenzhen, the hottest property market countrywide, after the latter enacted some of its strictest policies of late to rein in the sector.

This rise followed a similar trend across the country - in the first five months, the prices of new homes in China's 100 major cities recorded their biggest gain in almost three years at 1.34 per cent, with the average price per square metre at 16,006 yuan (US$2,500), China Index Academy data shows.

Property viewing also declined, agents said. In the secondary market, for example, "sellers are cautious about having people visit their houses during the pandemic, while buyers are taking a wait-and-see approach," said 58 Anjuke's Cheng. "New technologies such as virtual reality visits online only serve an assisting function and cannot compensate for the slump in transactions," she said.

Only 646 new houses were sold between June 7 and 11 in the city, approaching the lowest level of 622 units in weekly sales during Lunar New Year in February- a traditional off season, according to 58 Anjuke.

The impact of the coronavirus pandemic would be short term, as the key factor was the still stricter policies, CRIC's Xiao said.

"But the new policies are not strict enough to reverse the resilience of the market, which is characterised by expected peak supply in the second half and strong demand," he said, adding that he expected slower yet relatively stable growth in sales for the rest of 2021. Average monthly sales will be at around 900,000 to 1 million square metres, making this year's volume little changed from the total amount recorded last year, he said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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