The real estate market typically hits its peak in September and October. But this year, October has been unusually quiet.

 

The central bank released its latest property policy on September 27, raising the down payment for mortgages to 40 percent for second apartments. The interest rate on mortgages for second-apartment buyers was also increased to 1.1 times the benchmark one-year lending rate.

 

"The move not only increases the cost for those buying second apartments, but also suggests more real estate policies may be on the way to bring down prices," said Wang Yongxin, associate director of the investment department of DTZ, an international real estate services firm.

 

Yang Jia, a 30-year-old company executive, has temporarily postponed his search for a new home. He believes property prices could go down in a few months. "I would like to see if more real estate policies come out at the 17th National Congress of the Communist Party of China," Yang told China Daily. "After seeing property prices bolt up so rapidly in the past two years, I'm worried about buying at the peak," said Yang.

 

Wang Junli, a 45-year-old property investor who owns six apartments, has decided to sell most of them.

 

"Though property prices could still go up, the risks are also increasing," Wang said. "The down-payment hike could be the first move, and I'm worried there will be more policies to curb property investment - especially property tax."

 

More homebuyers are putting their plans on hold, statistics show. From October 4 to 6, 1,149 apartments were sold - the same number shifted in just one day on September 28, according to Shanghai property website Fangdi.com.cn.

 

It's been a similar story in the other major cities. Transactions have slowed recently in Beijing, which has seen prices rise by double digits for several months in a row. Some buyers in the city have even withdrawn from deals.

 

No more than 19 apartments were sold per day over the week-long National Day holiday in Shenzhen, and only four were sold on the quietest day.

 

The property market has also dipped in some second-tier cities. Over 19 million sq m of new housing was available in Chongqing in southwestern China during the National Day holiday. But during that time the key areas saw only a tenth of the deals made during an average week in September.

 

Peter Chang, chief executive officer of Care Property Holdings, said raising the down payment on second apartments will be the most direct and effective measure to cool down the sizzling market.

 

"If banks raise the deposit to 40 or even 50 percent, there will be an obvious drop in demand in the short term," Chang told China Daily. "Around 30 percent of potential buyers might change their minds."

 

But the efficacy of the new policy won't be seen until details are released, according to leading real estate firm 21st Century.

 

"The property market will feel the real impact after six months," it said in a report.

 

Yi Xiaodi, president of Sunshine 100 Real Estate Group, told China Daily that the new policy will have limited impact on the company as only a small proportion of its clients are second-home buyers.

 

But some academics and experts are doubtful the new policy will have any real effect on the market.

 

Zhong Wei, director of the financial research department of Beijing Normal University, said at a real estate forum that the middle-income group will be hardest hit by the new policy.

 

When demand for property exceeds supply, raising the down payment and interest rate on mortgages is not an effective way to curb skyrocketing prices, he said.

 

"The solution lies with more access to finance for property developers, especially in first-tier cities," he said.

 

(China Daily October 17, 2007)