Home sales plunged nearly 40% by both units and floor space in 15 major cities last week which was an extension of the declines that have been evident since mid-April.
The government is escalating efforts to avert asset bubbles after a record surge in property prices. Beijing has gone further, limiting residents in the capital to buying one new home starting this month, the first city to implement a restriction authorized by the central government.
Yang Qingli, a Beijing- based analyst at BOCOM International, said, “Austerity has taken the main tone in implementing the tightening policies, and Beijing’s property measures are likely to be followed by other cities.
“The extent of sales contraction will exceed what we anticipated, and the pace of home price declines will be faster than expected.”
The SE Shang Property Index of 34 Chinese developers tumbled 2.45% in one day, taking this year’s decline to 25%. China Vanke, the nation’s biggest listed developer, fell 1.2% on the smaller Shenzhen bourse, extending 2010’s loss to 32%.
According to China Jianyin analyst Xing Weiwei, home prices in first-tier cities will drop by 30% percent and commercial residential by 20%.
BusinessWeek quoted analyst Kris Li of Shenyin Wanguo Research & Consulting, who said a 20% without the introduction of a property tax, and a 30% decline with the tax, will be reasonable following declines in volume.