Closing the door?

Slower sales in cities like Beijing could hurt Homelink’s IPO


Vanke: another investor

On March 17 Beijing’s municipal government introduced a raft of new purchasing restrictions in a bid to cool the local property market. The policies were soon replicated by other major cities, making it a watershed date for homebuyers.

The restrictions raised the minimum downpayments required on second homes from 50% to 60% and expanded the definition of a second-home buyer to include anyone who already had a mortgage anywhere in China – and not just the city in which they were seeking to purchase another home.

The measures were pitched as much-needed steps to reduce speculation and keep the market open to buy-to-live buyers. But the higher downpayments for second homes have stemmed the number of those looking to add to their portfolios. According to Reuters, this group accounted for as much as 80% of buyers in the Beijing property market last year. Nationally, this may have had an impact too. The South China Morning Post reports that in the three weeks after March 17 sales across 500 areas monitored by Homelink – the largest agent for sales of previously owned homes – fell almost 75% from the three weeks before.

A further rule change: clamping down on sales of commercially-zoned units, which can now only be sold to residents with a local hukou (or non-locals who have paid social security for five years and are first-time buyers). These restrictions were aimed at curtailing the market for “commercial-residential” property, sales of which Beijing’s local government had previously encouraged, the SCMP reports. Suffering from a shortage of residential properties in many districts, city bosses encouraged developers to sell commercial property with residential options (i.e. convert office buildings to apartments). Cheaper than standard flats and billed as commercial units, they were a good choice for those without a local hukou (and thus didn’t face the same limitations purchasing such commercial-residential options as they did buying traditional homes). This was good news for migrants and younger workers, but it earned the attention of the speculators too, who found they could buy multiple “commercial” units, without paying higher mortgage rates.

This week China Daily celebrated the “return of sanity” in Beijing’s property sector, reporting that data from the first quarter showed the “crackdown on speculative investments and runaway home prices appears to be working”. Citing data from, the newspaper reports there was a contraction of sales volumes of close to 32% compared to the fourth quarter last year. But while sales dropped by volume, data from the National Bureau of Statistics suggested that resale prices rose by 2.2% in March and new home prices crept up 0.4%. Overall, prices were up 19% on the year before.

Property bosses were soon sounding the alarm at the slower growth, with Sun Hongbin, chairman of Sunac China Holdings, telling Caixin Weekly, “This round of tightening is unprecedentedly harsh, and I’m very, very pessimistic about the market.”

Sun was talking about the prospects for developers rather than homebuyers. But he has another cause for concern regarding falling sales volumes. In January Sunac paid Rmb2.6 billion for a 6.25% stake in online estate agent Homelink – also known as Lianjia – and Vanke has also invested, paying Rmb3 billion for an undisclosed share this month. Market insiders had predicted an IPO for Homelink later this year but the decline in sales volumes in cities like Beijing may force a delay. And in the meantime the press has been calling for greater regulation of estate agencies because of some of the tactics they use to drive up prices. The Global Times says Homelink is one of the brokers getting scrutiny, forcing the company to monitor its offices more carefully. “Lianjia sometimes inspects some of its branches two or three times a week, aiming to check whether newly opened branches have qualified certificates or housing resources are real,” an employee told the newspaper last month.

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