A Chill in Shenzhen Residential Market in Golden SeptemberBenefited from several adjustments in Government policy during the first half of this year, including slashes in the benchmark interest rate for a couple of times and an increase in value of home mortgages using provident funds, price in Shenzhen residential property market hit a record high over the same period, whilst the total number of transacted units also recorded a significant growth compared with last year. Meanwhile, we have seen an immense demand by first-time buyers and home upgraders, alongside the positive sentiment from Qianhai Shekou Free Trade Agreement. According to the National Bureau of Statistics, new commodity housing price in Shenzhen jumped 5.2% month-on-month, and 31.8% year-on-year. Growth in home price has become the highest among the 70 cities in August, representing nine consecutive months of improvement.

However, a dull market was just seen in September with a 25% plunge in the number of transactions at 15,000 units during “Golden September” this year, compared with more than 20,000 units being sold in the first half of this year. The plunge was attributable to higher demand ahead of the traditional peak season. Many would-be home buyers have become rational amid high home prices. A few cases of home sales for liquidity by some capital market investors have been reported. In fact, many developers have also held a wait-and-see attitude, leading to lower-than-expected new home units being launched. Besides, no new projects could be sold on the same day of launch. Although the number of new launches in the second half of September was said to be higher than in the first half, the take-up rate of 65% was not satisfactory at all.

Anyhow, strong market sentiment is not expected to be seen in the near-term, amid the negative impacts from the weak capital market, resulting in flat home price growth. We expect property developers to introduce various attractive sale packages. A drop in average home price and flat transaction volume could be seen in the fourth quarter, given historically low interest rate environment and some banks have already offered as high as 60% mortgages for second homes in Shenzhen.