China Real Estate: The Withdrawal Of The Withdrawal Of Purchase Restriction12 October, 2011, 18:24. Posted by Zarathustra
Tags: Real Estate
Early this year, the Chinese central government asked local governments to come up with measures to curb property prices. These local governments came up with their own prices curb targets, which were quite half-hearted. None but one of them had a target for falling prices. And earlier this year, we also had Haikou of Hainan reportedly cancelling the purchase restriction. I am not sure if they really did cancel restriction at the end, but here comes a new one, with a bit of drama.
Foshan of Guangdong has announced yesterday that it would cancel the purchase restrictions. However, they withdrew that decision to withdraw the restriction on the same night (via WSJ Chinese).
FT Beyond Brics points out that that prices fall in Foshan was not particularly big, but transaction volumes have collapsed. not surprisingly. The reason for the withdrawal of the curb is probably due to the reality that local governments themselves rely on real estate related income so much to fund themselves, such that a cooling property market isn’t particularly good for them.
But why the withdrawal of the withdrawal? As mentioned a while ago, while local governments are worried about the health of real estate developers as local governments depend on them, the view from the top might be very different. As FT points out, senior government officials quite like to see some real estate developers fail, and that would force them into cutting prices in order to generate cash flow to survive.
Perhaps this is a manifestation of the conflict of interest between central government which wants to see home prices to come down and local governments and real estate developers which don’t. So unfortunately, the local government and real estate developers seem to be running out of luck this time around.