Tighter mortgage policy affects market

The central government's new lending policies are having an effect on the property market. The impact is already being felt in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen.

In southern China's boom town Shenzhen, home to numerous housing market dramas, real estate agents find business is suddenly slowing.

A real estate agent Mr. Lin said, "Many buyers are postponing their purchase. Today is Sunday and still we don't have many visits."

In Shanghai, some investors have started to sell their properties. Mr. Li from Wenzhou in Zhejiang province, a city well known for its successful housing speculators, is busy selling ten apartments he owns.

"I planned to sell at 2.5 million yuan for an apartment. But I eventually sold at 2.2 million yuan. Why? Everyone knows the housing prices will go down. I sold all my ten apartments. " He said.

Mr. Li also says if mortgage policies continue to be tight, he will no longer enter the market.

China's State Council's decisive actions on mortgage policies hit the market right on the spot. The online property information portal Sofun.com says within days of the announcement of the policies, housing supply jumped 100 to 200 percent, but demand shrank by 80 percent.

Shenzhen's Real Estate Research Center says in the current market, commercial properties only account for 19 percent. The demand for homes and investment in properties have driven the prices high. To increase supply will drag prices down.

Wang Feng, the deputy director of Shenzhen Real Estate Research Center said, "For Shenzhen, the most fundamental measure to curb home prices is to increase supply of commercial housing. Only abundant supply can help curb prices."

Analysts say if the housing transaction volume continues to drop, prices will not sustain their current high level. But some warn that price adjustment needs rhythm. It's not healthy for the market to fluctuate too dramatically.