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Yet Another Chinese City Announces Cooling Measures

By Allison Halliday | November 3, 2011

It looks as if the Chinese government is still struggling to control property prices, as another Chinese city has announced restrictions on residential real estate purchases, which unusually includes a price cap.

China real estate

China's government has announced a price cap on properties in Zuhai, near Macao © Centaur -

Zhuhai is a southern Chinese city adjacent to Macau, and its government announced on Tuesday that transactions for new apartments will not be permitted if the price exceeds $1,775 per square meter. This price is substantially less than the current cost of high-end apartments in the city, as well as for other urban areas in China. However it looks as if these new measures may only be in place until the end of the year, which is traditionally a slow time for the property market. Zhuhai is also implementing other measures which are already being widely used by other cities, including limits on the number of apartments which can be purchased by families and restrictions on purchases by non-residents.

The report in the Wall Street Journal points out that the Chinese government’s attempts to control real estate prices have been repeatedly thwarted in the past, but the tide may be finally turning due to restrictions on bank credit and the slowing Chinese economy. After years of seeing prices steadily increase, it looks as if investors are becoming wary about buying Chinese property. At least 40 Chinese cities have already put restrictions on property transactions, but Zhuhai’s price cap is a new step. It was announced just days after the Chinese premier Wen Jiabao urged local authorities to continue real estate tightening measures for the rest of the year. Experts are predicting that these restrictions will continue until there has been a substantial correction to property prices.

The most recent index of national real estate prices shows property prices have fallen for two straight months, although they did increase slightly in Zhuhai. It remains to be seen how much difference this new price cap will make in Zhuhai, as Chinese typically register property transactions below their true market value in order to reduce taxes, and this price controls will only apply to new apartments. Even so property prices in Zhuhai are around three times the government's target price.

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.
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