On 17th August, a residential plot in Jingan, Shanghai was sold for RMB 11.01 billion or around RMB 143,000 per sqm of permissible GFA, making it the priciest plot in terms of both total price and accommodation value across the whole country. With several central district plots to be put on sale, the market expected land prices in Shanghai to continue rising. Yet, auctions for 4 plots had been put off by the authorities in the following week, stirring massive discussion in the market as it speculates imminent land sale market cooling measures. Soon after the cancellation of these land sale auctions, rumours of tightening mortgage policies being implemented on 1st September have spread across the city.
Buyers rushed into the residential market in a panic buying spree as the rumours spread. 555,700 sqm of residential GFA were sold alone in the primary market, rising over 93% w-o-w, during the week of 22nd to 28th August. 1,267 units were sold in the morning of 28th, which crippled the government’s registration website due to the huge traffic. The number of secondary transactions has also risen 34% w-o-w to 8,639 in the same week, meaning that there were 1,234 homes sold per day on average. On 29th, a record of 1,689 new homes were sold, even more than the 1,360 transactions seen the day before the implementation of the 325 policies.
In view of this, the authorities openly denied the rumours in the afternoon of 29th August, stressing that they have no intention to implement such regulations. Yet, rumours have already sparked a divorce craze in the city and long queues started appearing in divorce registration centres. Couples are ‘divorcing’ and many families are breaking up for a higher LTV ratio and better mortgage rates. According to the local regulations, single persons are allowed to buy an apartment with 30% down payment, while married couples can buy two but with a minimum 50% down payment required for the second unit.
Rising prices in both the land sale market and housing market have had the market shivering in fear of more cooling measures. The sudden surge in transactions and divorce rate has shown clearly just how much Shanghai buyers worry about imminent tightening policies. Despite the clarification made on the 29th, citizens has taken a skeptical view on the issue. Transactions continues to rise while queues in divorce registration centres get longer and longer each day.