Rumours of deregulation in property purchase and credit limits have been heard since April this year. In less than a month, a number of cities have been reported signs of easing in home purchase limits (HPLs) including Nanning, Tianjin, and Wuxi. Nanning was the first city with news of such deregulation. This was then followed by Tianjin who was heard to be the second city to release the third home purchase limit in mid of May. Meanwhile, Wuxi has also rumoured to allow deregulation in home purchases for high-end properties, each with unit size over 144 square meters.
Various promotional sales in new home purchases have become common amid a recent market downturn. Market sources indicated that a huge brand mainland developer has offered a substantial promotional discount for its bigger size units. Another developer has distributed parking vouchers with a combined value of several thousand Renminbi. Apart from that, one developer has also set off its sales package of 10% down payment national-wise. A slump in second-hand home prices has already been seen, with signs of more slumps being spread across Tier-2 and Tier-3 cities across China.
Many factors account for the current round of market weakness including excessive supply, higher market risk as a result of a continued vault in property prices, and lower market demand resulted from the massive new property releases. Although local governments have various kinds of rumours in home purchase deregulations, chance to have a turnaround in the market could be very low, unless a substantial loose in credit policies is introduced simultaneously. In fact, it may take some time for the market to observe the whatever news flows or rumours in terms of home purchase easings, since all of the above-mentioned rumours are still waited to be formally introduced. If we look for a regain in property market prosperity, perhaps we may need to wait till market has improvement in home purchase expectations, leading to higher turnovers and a relief in funding sources for property developers. Property prices in Tier-2 and Tier-3 cities may drop 5%-10% this year, whilst home prices in Tier-1 cities may still have a 5% gain supported by strong fundamental demand.
