Shenzhen plans to drastically increase the supply of new housing this year, as it ramps up efforts to curb a rapid gain in home prices amid nascent signs of an asset bubble emerging in the post-pandemic period.
The city is set to make a further 69,350 flats available by the end of 2020, a significant increase from the 50,434 on sale at the end of May, according to the Shenzhen Housing and Construction Bureau. It is the first time Shenzhen’s housing authority has released the data, a move seen as a way to increase transparency and rein in speculative home purchases.
Pressure on the local government has been building, after the technology hub’s home prices spiked when local banks opted to extend more loans and the local government eased some property restrictions. Shenzhen’s second-hand housing prices jumped 10 per cent from a year earlier in April, far outstripping an average gain of 0.4 per cent in the 70 major Chinese cities tracked by the statistics bureau.
Prices in Shenzhen’s Nanshan district, home to such technology juggernauts as Tencent Holdings and ZTE, surged even more, by 16 per cent in the same period.
As Beijing has unleashed a record amount of loans into the economy this year to combat the damage caused by the coronavirus epidemic, top policymakers are wary of excessive liquidity leading to a potential asset bubble. The official tone towards the property market remains stern, with Premier Li Keqiang and the Chinese central bank reiterating previous warnings that housing should not be a speculative investment.
The move in Shenzhen may mark a shift by the government in how it will respond to rising home prices in the future, with policymakers seeking to raise supply instead of curtailing demand, which typically has a fast detrimental effect on market sentiment.
“The central government is very determined on the stability of housing prices,” said Chen Tiancheng, an analyst at Tianfeng Securities. “It will neither stimulate the sector nor bring it down significantly. It will do more to adjust prices from the supply end.”
A rapid recovery in real-estate prices in Shenzhen stands in stark contrast to what is happening in adjacent Hong Kong, where the property market is now being battered by fears of unrest after Beijing passed a security law bill that would outlaw dissent in the former British colony.
Signs of overheating have already emerged in Shenzhen’s housing market. A plot of land was sold for a record 11.6 billion yuan (US$1.63 billion) in the city in May, translating into 63,126 yuan per square metre. That is about 10 per cent more expensive than the previous record set in December.
The frenzy came after Shenzhen loosened some restrictions in the local property market. The government lowered the threshold for the minimum funds required to take part in land auctions, raised the price cap for new housing and shortened the period of mortgage approvals.
Sign up now and get a 10% discount (original price US$400) off the China AI Report 2020 by SCMP Research. Learn about the AI ambitions of Alibaba, Baidu & JD.com through our in-depth case studies, and explore new applications of AI across industries. The report also includes exclusive access to webinars to interact with C-level executives from leading China AI companies (via live Q&A sessions). Offer valid until 31 May 2020.
More from South China Morning Post:
- China property: how the world’s biggest housing market emerged
- Credit ratings of mainland China property developers to remain weak
This article Shenzhen raises supply of new homes as China’s tech hub moves to curb surging house prices first appeared on South China Morning Post