A night view of Guangzhou’s Pearl River New Town. The provincial capital of Guangdong is in a tight economic rivalry with Shenzhen and Hong Kong. Photo: Asia Times

Guangzhou authorities have launched new measures to control property prices, a state intervention in markets that has sparked complaints existing homes and apartments will lose 30 to 50% of their current value due to the move.

Analysts said the city’s up-and-up property prices would fall within months, as happened in nearby Shenzhen earlier this year. But buyers aren’t expected to benefit as most sellers are expected to take their properties off the market.

In 2017, President and Communist Party General Secretary Xi Jinping told the party’s National Congress, “housing is for living in, not for speculation.”

Various cities have since launched measures and initiatives, including stricter rules for mortgage loan borrowers, the construction of more affordable housing and a 5% price growth cap on new homes, to tighten property market pricing.

The measures have slowed price growth but until now have not lowered prices. In top-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, home prices have continued to surge by more than 5% annually.

In January this year, Shenzhen’s secondary property price recorded a high of 72,436 yuan (US$11,233) per square meter average. On February 8, the city’s housing authorities unveiled the country’s first price guidance on the sale of existing homes.

As a result, in June, the number of property transactions in Shenzhen’s secondary market declined 60% year on year while the average price fell 15% from the January levels to 61,500 yuan per square meter

Ningbo, Chengdu and Xi’an have since launched their own price guidance measures, with suggested prices between 30 to 40% off market levels.

Measures to curb the rise in housing prices have failed in top-tier cities such as Beijing. Photo: iStock

A homeowner can still sell an apartment at Guangzhou’s Zhonghai Flower City development at 175,000 yuan per square meter, but the buyer can only get a loan based on the suggested price of 92,641 yuan per square meter, meaning buyers need to make bigger down payments.

Li Yulia, chief researcher at the Housing Policy Research Center of Guangdong province, said in the past most sellers tended to mark up prices of their apartments, leading to price surges. Li said Guangzhou’s new measure would help stabilize prices in primary and secondary markets.

Although price guidance has helped suppress the secondary home prices in some cities, mainland media reports have pointed out that few homebuyers will benefit.

In Ningbo, for instance, a woman who was left anonymous in a media report bought an 88-square-meter apartment for 3.78 million yuan, or 43,000 yuan per square meter, in July last year. According to the new suggested price, her apartment has lost 30% if she were to put it on the market. She said she would not offer discounts.

In Xi’an, a screenshot of a home sale advertisement has recently gone viral on the Internet. A home owner said he would sell a six-million-yuan apartment at the suggested price of three million yuan.

However, he said the buyer would also have to purchase a Picasso replica from him for 3.8 million yuan as part of the deal.

Read: Chinese city curiously caps home price discounts at 15%