The primary residential market remained quiet in the fourth quarter of 2011, amid the government’s home-purchase restrictions and the wait-and-see attitude adopted by potential buyers. The total transacted area of primary residential properties in 20 major cites dropped 6.4% quarter on quarter, or a significant 45.4% year on year. Adjusted new home prices fell 2.3% quarter on quarter. This represented the first drop since the first quarter of 2009.
Only Haikou and Jinan registered year-on-year growth in total transacted area, while others among the 20 major cities witnessed drops of 20–73%, with Shanghai, Chongqing, Hangzhou, Suzhou, Tianjin and Dalian recording falls of over 50%. Adjusted primary residential prices in over half of the 20 major cities showed quarter-on-quarter drops. However, only four cities (Hangzhou, Wuxi, Chongqing and Xiamen) registered price reductions compared to the same period in 2010.
Knight Frank expects increased inventory and funding pressure will force more developers to cut prices to promote sales, but the sentiment in China’s residential market to remain weak in 2012. Meanwhile, the central government and a number of local governments emphasised that regulatory measures on the property market would continue throughout 2012. Property tax may be extended to other cities from Shanghai and Chongqing, which could further regulate and promote healthy development of the market. However, taking into account the contribution of the property industry to the local economy, some cities may fine-tune current policies to promote demand for owner-occupied homes.