Impacts of the continuous price limit policy in Shenzhen

china insight

Following the discussion of the new “Three-Price-In-One” housing policy in Shenzhen, this week we will focus on analysing the impacts of the continuous price limit policy on Shenzhen’s current first- and second-hand residential market. Perhaps this can spark up some inspiration for buying or renting homes. Under the new policy, taxation for second-hand homes has increased substantially, and thus prompted buyers to switch to the first-hand residential market. Shenzhen is in fact experiencing an excessive demand in housing with insufficient supply. Under the strict price control measures, new home prices in the city have recorded a decline for 18 consecutive months between September 2016 and March 2018. Additionally, developers are highly reluctant to sell their new luxury homes as well as flats located in high-quality residential areas, leading to a further decline in new housing supply.

In response to the market changes, since last year some developers have adjusted their marketing strategies, which have resulted in a new trend in residential property sales—sales of entire completed projects and sales of multiple units. From some developers’ points of view, selling an entire project can help maintain the integrity of their work, speed up the return of funds and improve operational efficiency. Buyers of these bundles of new and/or old residential properties include enterprises, investment companies and even fund houses. Recently there have even been talent management companies sweeping in to snap up apartments and residential properties for the purposes of accommodating their acquired talents. Since last year, there have been at least three projects located in the city’s core districts which were either exclusively or partly for long-term rentals. If conditions permit, developers may consider selling their properties this way. 

At the same time, trends are showing a shift towards the leasing market, with four cases of ‘for rental only’ properties on the market so far this year. As the number of such property types is still not very significant, its impact on existing housing transactions and prices remain limited. Under the continued home purchase measures and developers’ sales strategies, the number of new homes available to end-users are shrinking. So even though the overall property prices are stabilising, potential end-users could gradually turn to the leasing market instead.