The amount of new housing sold in Shanghai jumped 93 percent last week as fears of a jump in down payments drove home sales to more than 5000 units in one of China’s most expensive real estate markets. The number of square metres sold in China’s commercial capital was the highest seven-day volume in five months, according to the Shanghai Homelink Real Estate Agency.
The buying frenzy shortly after Bloomberg reported the government was considering cooling measures to help tame the city’s rising home prices. The news agency, citing two anonymous sources, noted that proposals included a down payment increase for some first-home buyers to 50 percent up from the current 30 percent. Those purchasing a second property would be required to put up a 70 percent down payment.
Crashing Websites and Splitting Up Marriages
The news created panic among homebuyers who rushed out to complete purchases before the reported measures could come into effect. According to The China Post, the Shanghai Real Estate Trading Center’s website crashed on Sunday due to an influx of traffic.
Some couples went as far as divorce in order to circumvent restrictions that raise down payments according to the number of properties owned by a household. The spike in splits forced one local marriage registrar to limit the number of divorces it would process each day.
The South China Morning Post noted that, under the terms of the reported proposal, a second home costing RMB 5 million would require a RMB 2.5 million down payment. However, after a divorce, at least one former member of a couple would be able to qualify for a mortgage that would require a down payment of only RMB 1.5 million.
Government Denies Plan for New Home Purchase Restrictions
In an attempt to calm nerves and limit panic buying, the Shanghai Housing and Urban-Rural Development Commission announced that no new measures were imminent. the Shanghai Daily reported
“The commission hasn’t discussed the possibility of such policies,” the commission announced via its official Weibo account, according to the Shanghai Daily. “Shanghai will continue to carry out current rules to maintain a steady momentum of property transactions.”
Sources had told Bloomberg that meetings between banks and the Shanghai branch of the China Banking Regulatory Commission had taken place in early August where the two sides discussed possible changes.
The government talks were alleged to have taken place after leading officials vowed to curb asset bubbles and focus on strengthening financial stability at a Politburo meeting led by President Xi Jinping in July.
Buyers Undeterred by March Measures
In an attempt to slow down skyrocketing home prices, the Shanghai government rolled out cooling measures in March that tightened approval criteria for non-resident homebuyers, increased down payments for some second homes and banned unregulated lending.
The measures had some initial success in reining in the market with both sales and prices declining during the weeks following implementation. By July, however, the market started to heat up again with home prices rising 27 percent from the previous year, according to data from the National Bureau of Statistics.
Land prices have also reached a boiling point in Shanghai and any new curbing measures would also be designed to tamp down record prices being paid for land in the city. Things came to a head earlier this month when a residential land plot on Zhongxing Road was scooped up by Fujian-based Ronshine China Holdings for RMB 11 billion ($1.66 billion).