China’s most expensive city, Shanghai, has been a point of concern for Beijing policy makers. Over the years, the government has all but locked the door to second and third home sales. A relaxation of those policies have kept Shanghai real estate stable. But the latest data shows new home sales and supply fell last week despite those policies, according to Uwin Real Estate Information Services.
New home sales dropped 10.5% from a week earlier during the seven-day period ending April 5. On the supply side, new home square footage was 71,100 square meters, down 64%.
“The latest government endeavor to loosen its mortgage policies is supposed to help boost residential sales of both new and existing home, it is always the price and the supply and demand situation that finally affect the transaction volume,” Huang Zhijian, chief analyst at Uwin, told the Shanghai Daily on Tuesday. “Real estate developers better focus on cutting the inventory which still stands at high levels.”
Second-time home saw their minimum down payment reduced to 40% from the previous 60% on March 30. First-time home buyers still have to put 20% down, though that is a decline from the previous minimum amount of 30%.
High down payments, and the fact that China does not have a large mortgage backed securities market, have kept China’s housing bubble from exploding. China does have a mortgage backed securities market, but it is not as large as the U.S. market, which coupled with zero-down mortgages, ultimately led to the housing crisis of 2008.