Shenzhen real estate to see knock-on effect

Even though Shenzhen is not included in the list of cities to see cuts in down payment requirements for home buyers, some experts argue it will still push up the already rocketing housing prices in the Guangdong economic powerhouse.

The People's Bank of China and the China Banking Regulatory Commission announced on Tuesday that down payment requirements will be reduced from 25 percent to 20 percent for first-time home buyers and from 40 percent to 30 percent for second homes.

It is a move believed to be aimed at reviving housing markets in cities without home purchase restrictions. Shenzhen is among the five mainland cities with such restrictions currently in place, the others being Beijing, Shanghai, Guangdong capital Guangzhou and Sanya in Hainan province.

Yan Yuejin, director of Shanghai E-house Real Estate Research Center, reminded investors that home prices in these cities would also be affected, despite the lack of curbs.

"The mood of the nation's whole real estate market will become more optimistic," Yan said. "First-tier cities with less pressure to destock will see more transactions even if they are not included in the new plan."

Wang Fei, director of the Centaline Property Research Center in Shenzhen, reckons that an optimistic outlook and buyer confidence in cities around Shenzhen will be transmitted back to the city.

Zhang Mengying and her boyfriend, both fresh university graduates in Shenzhen, had been planning to buy a house there for a while but were hesitant because of the high price.

"I of course hope Shenzhen could be included in the plan so that we can afford the down payment for a bigger house, but we will not choose nearby cities even if it is not," said Zhang.

Song Ding, a senior researcher at the Tourism and Real Estate Industry Research Center at Shenzhen-based think tank China Development Institute, however argued that the policy will slow down the city's hot real estate market.

He said one of the most important controlling factors in Shenzhen's market is liquidity, which will become less active as investment is diverted to neighboring cities, something that many young potential buyers, including Zhang Mengying, are waiting for.

The average price of new homes in Shenzhen reached 46,515 yuan ($7,075) per square meter in January, up by 74.3 percent year on year, according to data from Shenzhen's Urban Planning, Land and Resources Commission.

grace@chinadailyhk.com

The average price of new homes in Shenzhen reached 46,515 yuan ($7,075) per square meter in January, up by 74.3 percent year on year, according to Shenzhen's Urban Planning, Land and Resources Commission. Qilai Shen / Bloomberg

(HK Edition 02/05/2016 page8)