Government Restrictions Cool Real Estate Market in China

Hong Kong–Based on the relaxed real estate markets in two of China’s biggest cities, the Chinese government’s plan to ease real estate investments appears to be successful, The Wall Street Journal reports.New home prices in Shenzhen, a southern town of nine million next to Hong Kong, fell 8 percent from September to the end of 2007, according to global real estate adviser DTZ. In China’s third-largest city, Guangzhou, new home prices dropped 9.9 percent in November from a high of 11,574 yuan ($1,600) a square meter in October.After several years of growth, real estate in Shenzhen faltered in summer as central authorities worked to slow the market. Real estate transaction volumes fell 81 percent in November from a high of 8.6 million square feet in January 2007. A new home price decline occurred later.Property prices in China have skyrocketed in recent years as its cities added tens of millions of new residents and the amount of middle-class homeowners shot up, prompting abundant investment in the real estate sector.After concern the market had increased too quickly due to developer discounts and a decline in new home prices, the government raised taxes and tightened sales restrictions on residential property to try to regulate the market.But now, investors worry the southern decline might indicate the country is primed for its first national housing price downturn since private homeownership became the norm in the late 1990s. A property decline in China could hurt investor confidence in the country, altering stock prices and the robust economy.