BEIJING, Nov. 7 -- Peak season for the property market in this southern city neighboring Hong Kong is usually in the autumn months of September and October.

    But this year the number of transactions dropped sharply over that period, as banks tighten credit and the local government prepares to issue a new policy trying to curb rising prices.

    Sales of new residential homes dropped 16 percent in September month-on-month to 302,400sqm - a record low for a single month of the year, according to the local housing management authority.

    That's nearly 30 percent lower than the more than 430,000 sq m sold last September.

    The situation was even worse in October. Daily transactions from October 1 to 9 plunged almost 80 percent from September to just 2,026sqm. Sales dropped to less than 1,000 sq m from October 10 to 16, according to the housing management authority.

    "Micro-control policies have begun working to cool down the overheated real estate market in Shenzhen," said Wang Feng, director of the Shenzhen Real Estate Research Center.

    "Both investors and homebuyers are taking a wait-and-see approach, and that's creating a stagnant market," he said.

    But prices, which soared from an average 9,384 yuan per sq m last year to 15,518 yuan in August, are expected to remain high.

    "We expect rocketing prices to ease to a normal growth level when the seller's market gradually becomes a buyer's market. But it's not realistic to think the market will crash and prices tumble to the level of two or three years ago," Wang said.

    Continued fast economic growth could prop up the real estate market, which is vulnerable to other factors like housing supply and economic integration in the region, including Hong Kong and other Pearl River Delta cities.

    Zhang Wei, a senior analyst with Centaline Shenzhen, a Hong Kong-based real estate agent, expects housing prices to drop 30 percent from the peak over the next two years.

    "The new mortgage policy isn't a short-term one. It's a reflection of the government's push to regulate the market," Zhang said.

    While investors and speculators are under greater financial pressure, homebuyers are also more cautious to enter the market, anticipating a drop in housing prices, he said.

    The People's Bank of China said in late September that homebuyers must pay minimum mortgage down payments of 40 percent for their second residential properties. The mortgage interest rate for second homes was also raised to 1.1 times the benchmark one-year lending rate.

    In Shenzhen, the local government will soon launch a new second-hand housing evaluation system and will impose a 20 percent income tax on transaction earnings based on the official evaluation rather than the contract signed between agent and seller.

    The government is trying to prevent speculators from revising contracts to reduce personal income tax and increase profit.

    Homebuyers in the city are hopeful the new policies will bring down prices.

    Emily Wang, who just quit her job to have a second baby, said she is waiting for housing prices to fall. "It's too crowded for a six-person family to live in a two-room apartment, but we can't afford a bigger one," she said.

    "If new home prices drop to around 10,000 yuan, we would consider buying one - or we might seek an opportunity in the second-hand market," she said.

    Effie Zhang, a 27-year-old media strategy planner, was lucky. She recently sold her 38-sq-m apartment, which had doubled in value since she bought it two years ago, and purchased a second-hand three-bedroom apartment after she got married.

    "Its value won't drop dramatically given the economic boom and closer ties with Hong Kong. But whether it rises or drops in value, it's a cozy home - good location, good environment and it's convenient," Zhang said.

    (Source: Shanghai Daily)