SHANGHAI, Jun. 2 -- Property sales in Beijing, Shanghai and Shenzhen fell as much as 70 percent in May as developers delay sales following government tightening measures.
In China's capital Beijing property signings slumped nearly 70 percent to 3,357 in May from April, the Shanghai Securities News reported, citing data from bjfdc.gov.cn. In Shanghai, the nation's financial center, transactions may have dropped about 70 percent to 2,550 signings, the paper reported, and in the industrial city of Shenzhen, sales fell 62 percent.
China has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened down-payment requirements for second-home purchases. The government is trying to peel back a stimulus plan and $1.4 trillion lending binge that revived economic growth while raising the risk of asset bubbles.
"The government should have put in tougher enforcement earlier to prevent the high prices," said Lu Qilin, a Shanghai-based researcher at UWin. "If the government doesn't stop this soon, the bubble will burst."
An index tracking 34 real estate firms traded in Shanghai fell 2.2 percent as of 1:13 p.m., extending this year's loss to 30 percent. China Vanke Co, the nation's biggest listed developer, dropped 1.3 percent to 7.12 yuan. Poly Real Estate Group Co declined 3.9 percent to 10.62 yuan.
Copper, aluminum and zinc also declined on concern slumping property transactions and slowing manufacturing growth in China, the world's biggest metals consumer, may hurt demand for commodities. Lead, nickel and tin fell.
Real estate prices rose a record 12.8 percent in April from a year earlier, the National Bureau of Statistics said on May 11. Transactions for new homes in Shanghai fell 56 percent in the month to May 16 from a month ago, to 520,000 square meters (5.6 million square feet), Lu said.
Most developers are postponing project launch dates and are waiting to see market developments before finally pricing new projects, said Oscar Choi and Marco Sze, Hong Kong-based analysts at Citigroup Inc in a report distributed today.
China's property market problems are worse than in the U.S. or U.K. before the financial crisis, the Financial Times said today, citing an interview with Li Daokui, a member of the Chinese central bank's monetary policy committee. The country's housing market problems combine a possible bubble with the risk of social discontent, he said.
China's State Council approved the National Development and Reform Commission's gradual property tax reform, according to a statement on the Chinese government website yesterday.
Shanghai's plan to begin a property tax on residential real estate has been submitted to the Chinese central government for review, the China Securities Journal reported yesterday. The city may impose the tax on people without residence permits and those who do not file income tax declarations for three years or more, the report said, citing unidentified people.
Shanghai developers have delayed sales of new residences because the municipal government hasn't announced its property policy, the Oriental Morning Post reported yesterday, citing unidentified developers. Only 46 of a scheduled 96 developments were put on sale for the month as of May 28, the newspaper reported, citing Soufun.com, a real estate data research website.
"We expect more measures to be introduced on developers, especially those to monitor construction schedule and restrict cash flow, thus pushing developers to cut the price earlier," the Citigroup analysts wrote.
Shi Weijian, an analyst at Jianghai Securities, said Shanghai's government may announce a property tax as early as this month, which will likely be implemented at the end of the year. Shanghai home prices may fall between 25 percent and 30 percent from the introduction, he said.
Gao Jian, a Shanghai-based analyst at Northeast Securities, forecast a drop of prices of about 20 percent should a property tax come into effect.
"We've seen downward pressure of housing transactions and prices, and the correction is likely to continue in the next one to two years," he said.