Shenzhen home prices fell 15 per cent after about 300 cooling measures were launched in first half of 2021

have finally declined, 286 rounds of cooling measures, the so called Xue Qu Fang

Home prices in Shenzhen, mainland China’s most expensive residential property market, have finally declined, falling by as much as 15 per cent, after about 300 rounds of cooling measures were introduced across the country in the first six months of the year.

Towards the end of June, the average price of a second-hand home stood at 61,500 yuan (US$9,488) per square metre, or about 15 per cent below a peak of 72,436 yuan per square metre recorded in January this year, according to E-House China R&D Institute.

This was the result of 286 rounds of cooling measures issued by central as well as local governments. These measures included a tightened Hukou scheme, higher penalties for fabricating information to get first-home purchase quotas and defining property rights for estranged couples, according to the research unit of Centaline Property Agency in China.

“This round [of cooling measures] is more precise and powerful, hitting core issues. For example, the crackdown on Xue Qu Fang, the setting of a guidance price for lived-in homes, and the summoning of officials from cities that have recorded sharp rises in home prices by the Ministry of Housing and Urban-rural Development. The government is for sure very determined this time,” said Zhang Dawei, an analyst with Centaline.

China’s top policymakers are keen on measured growth in its economy after the coronavirus pandemic, but want to avoid any overheating and spillover effects from expansionary US monetary and fiscal policy. They are also anxious about avoiding housing affordability issues spilling over into potential social instability.

“We will keep the prices of land and housing, as well as market expectations, stable,” Premier Li Keqiang said in his annual work report to China’s legislature in Beijing in March. “We will address prominent housing issues in large cities [and] make every effort to address the housing difficulties faced by our people, especially new urban residents and young people.”

The latest tranche is about 30 rounds more than that in the same period in 2019 and about 100 rounds more than that in 2018. The number only falls short of that for the first half in 2020, when the pandemic hit the country and more policies were rolled out to halt construction and shutdown home sales centres.

Also as part of the latest tranche of cooling measures, parents who had bought the so called Xue Qu Fang, or homes in good school districts, for eye-watering prices in some subdistricts of Beijing’s Xicheng district, were informed by local education officials that their children would be admitted to schools in other neighbourhoods in Xicheng.

This means that a hukou of a subdistrict in Beijing might no longer be enough to secure a spot in a primary school in that subdistrict. The policy has been discussed for years across China, but it has not been adopted in most places.

Market observers said that such a change to school admissions could cause home prices, not only in Beijing, but across the country, to cool quite drastically.

“I have received some inquiries from school district home seekers who were worried that Shanghai would introduce changes similar to Beijing’s Xicheng district. Transactions involving such homes have quietened down of late, as many people are waiting and watching,” said Brian Feng, an agent in Shanghai’s Huangpu district, which is home to some top schools.

Homeowners were also more open to negotiations now if the buyers’ interest was genuine. “Earlier, it was difficult to make appointments with these owners. After all, without the possibility of securing a seat in a nearby primary school, these homes are not worth much,” he added.

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