China Real Estate: First Casualty Of A Local Government26 April, 2011, 0:07. Posted by Zarathustra
Tags: Haikou, Real Estate
EEO reported that the city of Haikou of Hainan province will suspend the buying restrictions for residential real estate because the restriction has hurt the real estate market, affecting the property related revenue for the local government.
The buying restriction affected buyers outside of Hainan the most. The trouble was that 60% of the buyers for Haikou real estate were people coming from outside of Hainan. As a result, taxations and other revenues related to the property market has dropped dramatically over a year ago according the the authority as transaction volume dropped 90% over a year ago. New start area in the first two months of the year dropped 9.4% over a year ago, and no land has been sold year-to-date. However, the overall prices haven’t dropped much.
And there is little wonder that the government is troubled because one-fourth of government’s revenue is property related. Just like mentioned previously, the local governments rely heavily on real estate revenue, thus it is in their interest to keep the real estate prices high as opposed to the central government’s order. The buying restrictions certainly hit the local governments, and Haikou seems to be the first to lift the restrictions. Although the central government has enormous determination to curb prices, it will be interesting if more local governments lift their buying restrictions and other tightening measures.
The next focus will be whether any of the real estate developers are feeling the pain.