Major disappointment was in store today for investors anticipating an end to China’s restrictions on its real estate markets as an eastern China city which had been the first to offer relaxed policies on residential property purchases this year abruptly reversed itself.
Only last Thursday, the city of Wuhu in eastern China’s Anhui province had offered subsidies on new home purchases as well as waiving deed taxes in an effort to revive the city’s real estate market. In response to what some observers saw as a potential return to the good old days of China real estate speculation, an index tracking Shanghai-listed real estate companies had surged 4 percent following the news.
However, the central government’s commitment to bringing down real estate prices was reaffirmed today as Wuhu announced in a statement on the city government’s website that it was temporarily suspending its home subsidy policy so it can “study details on how to implement the rules.” Sound like someone got schooled by their friends in Beijing, doesn’t it?
The markets which had perked up following the news last week abruptly slid back down as a measure tracking real estate stocks on the Shanghai Composite Index slid 1.8 percent by closing, the most among five industry groups on the benchmark gauge. Poly Real Estate Group Co., the nation’s second-biggest developer by market value, dropped 3.1 percent in Shanghai, the most in two weeks. China Vanke Co., the biggest, decreased 1.9 percent in Shenzhen.
In an email from Credit Suisse analyst Jinsong Du which was reported by Bloomberg,the Hong Kong-based Du noted,
We at Credit Suisse recommend selling China property sector now. The Wuhu reversal clearly shows that the stock market has severely underestimated the central government’s political will to cool the housing market significantly further.
According to what we can see here at Mingtiandi, look for China’s appetite for real estate to remain on a tight leash until at least mid-2012, with the distinct possibility that Beijing will continue to hold a hard-line until after the party congress this autumn.