Chinese Developers Decline on Tightening Fears: Shanghai Mover

Chinese developer shares fell the most in two weeks amid concerns that Beijing and Shanghai will implement new measures to curb demand and rising property prices, prompting other cities to follow suit.

An index tracking property companies listed in Shanghai fell as much as 3.1 percent and was 2.5 percent lower at the 11:30 a.m. local-time break, heading for its biggest decline since Oct. 25. China’s benchmark Shanghai Composite Index lost 0.2 percent.

Shanghai last week raised the minimum down payment required for buyers of a second home to 70 percent from 60 percent as house prices in China’s financial hub surged. Beijing will ban developers from marketing homes that are still under construction and priced over 40,000 yuan ($6,566) per square meter (10.76 square feet) by the end of this year, the official Xinhua News Agency reported yesterday, citing a meeting of the city’s commission of housing and urban-rural development with developers.

“The market is concerned that the government will take more measures to rein in the real estate sector amid fast rising prices,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The policy risk is the biggest one facing the industry now.”

Poly Real Estate Group Co., China’s second-largest developer, was down 2.8 percent at 8.88 yuan and Gemdale Corp. declined 1.8 percent at 5.87 yuan in Shanghai trading. Shenzhen-listed China Vanke Co., the biggest developer listed on mainland exchanges, was down 2.5 percent at 8.65 yuan.

‘Old Policies’

Counties and municipal departments should take measures to ensure Shanghai’s annual price-control target is met, according to a statement on the local housing bureau’s website on Nov. 8. The city also tightened the qualifications required for non-local home buyers and will increase residential land supplies, according to the statement.

The Shanghai Stock Exchange Property Index has fallen 9.7 percent this year even as hopes ran high last month after President Xi Jinping’s comments that the government will focus more on boosting supplies to contain housing prices. Guangzhou, the only first-tier city that hasn’t raised down payment for second homes to 70 percent, and some second-tier cities with excessive price gains, may be the next to move, according to Kris Li, a Shanghai-based analyst at SWS Research Co., said.

“There were expectations that the government would relax on the curbs and do more on increasing supplies, but there’s a gap between what was said and what you see in reality,” Li said. “They’re still having to use some of the old policies. So the expectations have fallen through.”

Rising Prices

Home prices in China’s four major cities jumped the most in September since January 2011, heightening concerns a bubble is forming as the national government refrains from introducing more property curbs that would hinder economic growth. Prices surged 17 percent in Shanghai from a year earlier, the biggest gain in the 70 cities the government tracks, only behind the 20 percent jump in the southern business hubs of Shenzhen and Guangzhou.

New home prices excluding government-sponsored social housing jumped 21 percent in Beijing in September from a year earlier, defying the strictest property curbs among all cities, according to the latest data from the National Bureau of Statistics. The Chinese capital raised down payment for second homes to 70 percent in March.

Shanghai will crack down on price collusion and violations of home-purchase restrictions and will take measures to ensure the stability of the land market, according to the housing bureau’s statement last week.

“Local governments of core cities, under pressure from high property prices, will take measures to curb demand but the probability of tightening spreading to other cities is relatively low,” Zhou Yating, analyst at Ping An Securities Ltd. in Shenzhen, wrote in a note today.

— With assistance by Aipeng Soo

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