A recent survey has shown that average home prices in major Chinese cities have risen in March. This is due to the rush to beat the government's restrictions on the speculative home market.
The study revealed that average home prices rose 3.9 percent in March when compared to a year earlier. Though prices have been rising consecutively for four straight months, they gained the fastest in March. Prices were up 1.03 percent from that of Feb. 2013.
Cost of second hand homes also increased 2.8 percent from the 1.5 percent increase recorded in February in 10 major second-hand house markets of China. On a year on year basis, prices soared 18.06 percent in March, reports NASDAQ.
The Chinese government announced new property rules earlier in March that included a 20 percent capital gains tax on property sale profits. Down payments and mortgage interest rates were also increased. The price rush was mainly due to the property curbs.
"Against the unclear policy trend, most buyers caught 'the last bus' to enter the market. A portion of demand surged into the market accelerating the housing purchase process on panic and psychological pressure from worries over an increase in tax," the China Index Academy, owned by real estate website, SouFun Holdings, said in a statement.
More local governments are tightening property policies now. Beijing and Shanghai have announced a series of regulations, which will help in deflating the housing balloon.
In Beijing, unmarried people will now be allowed to purchase only one house. The 20 percent capital gains tax and increased down payments are the other rules. An identical capital gains rule applies in Shanghai as well. In addition to that, the city prohibits banks from giving credit to third-home buyers.
Around 17 other cities have announced property curbs as well that will take effect by the end of the first quarter. While some experts believe that the aggressive nation-wide curbs will weaken home sales in the coming months, others believe that the fundamental demand will remain unchanged and that the regulations will only work to solve short term problems.
"This will help calm people's panic about home prices. At the same time, restrictions on home purchases don't change the fundamental demand, and it seems the new measures in Beijing are aimed more at short-term problems rather than long-term healthy development of the property market," Yi Xianrong, researcher at the Chinese Academy of Social Sciences, said to Bloomberg.
