Housing market recovering on solid demand in Zhuhai

People look at a real estate project in Zhuhai
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Zhuhai in southern China's Guangdong province has recently been mocked for having the shortest-lived real estate market relaxation measures, which were scrapped just hours after being announced by the city government. However, the solid demand for property has enabled transactions to recover steadily, although the harsh "double-control measures" have dampened speculative property investments.

Taking cue from the central government's market cooling policy, Zhuhai municipal officials imposed double restrictions on both prices and purchases in November 2011.

The measures limit the average apartment price at 11,285 yuan yuan (US$1,767) per square meter and allow only local residents and nonresidents who have paid taxes and social insurance policies in Zhuhai for at least one year to purchase no more than one extra housing unit in the designated downtown Xiangzhou district..

The measures suddenly froze property transactions and sent developers into panic who stopped bidding for public land parcels released by the authorities.

The Housing, Urban-Rural Planning and Development Bureau of the Zhuhai city government made a decision on July 13 to ease the restrictions on consideration that both the property prices and speculations on the market have been placed under control. But the decision was rescinded immediately for further "refining."

Recovering

Yet the real estate market in Zhuhai has actually started recovering mainly because of strong demand, reports Time Weekly.

A senior official at Xiangzhou district acknowledged that the control measures started last November sent the market in Zhuhai into a tailspin with only 230 housing deals reached in January, down by more than 40% from last October.

But the deals stopped falling in February and recovered to 359 homes in March and returned to the pre-control levels in May.

Property developers said there is always a solid and "inelastic demand" for housing units in Zhuhai, which is located in the thriving Pearl River Delta of Guangdong and close to both Macau and Hong Kong.

Buyers stayed on the sideline in the first few months to study the government policy and possible market changes. But they decide to move into the market now on new signals brought by the central bank's recent credit-easing policy.

Price and purchasing controls have no significant impact on people who have real need for apartments or office premises while they can easily qualify for buy one extra unit, said the developers.

'Limited limitations'

Market analysts said there are only "limited limitations" on real estate developers because they have worked out ways to circumvent the curbs. Developers have found a loophole that the government's control measures do no specify what type of houses fall under the policy.

Some developers now sign two contracts with one buyer. The first one carries the price for a newly constructed "skeletal apartment" that is still unlivable because it has only the preliminary structure of rough walls and partitions. Unfinished and unfurnished, the homes fall under the stated price ceiling.

But the two sides also ink also a second contract with a higher price on the understanding that the eventual property price will be much higher once the home is completed, said analysts.