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Don't propose homes on commercial sites, Shanghai developers told

Property Markets / Outlook

Australia

May 25 2017

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Al Gerard de la Cruz

Proposals for residential projects that will be converted from commercial establishments or situated in land for commercial use have been called off in Shanghai.

Taking cue from Beijing, where a similar measure designed to tame frothy home values rolled out in March, Shanghai housing regulators have determined that 17 million square metres in existing residential projects around the metropolis have their provenance in commercial buildings.

In addition to squeezing proposals out, authorities will be questioning projects that have already gained approval but have yet to be launched or those completed but yet to be turned over to customers.

“We believe even those developers that have been given sales permits or pre-sold units already will be forced to change the sites back for commercial or office use,” Yan Yuejin, research director at E-house China R&D Institute in Shanghai, told the South China Morning Post.

Converted apartments constitutes a third of Shanghai home sales (in terms of floor area) last year, an increase of 13 percent from 2015, the property consultancy reported. Property curbs typically do not apply to converted apartments, i.e. non-residents of Shanghai can buy them while locals are eligible for second purchases.

Property seekers oft-desire converted apartments for cheaper price points than purely residential projects, which are built on scarcer, and consequently more expensive, residential land.

Shanghai’s new cooling measure marks a complete shift from pronouncements made by the central government last year. Premier Li Keqiang then exhorted developers to convert more commercial spaces into rental housing in a bid to prevent a glut of empty offices and retail establishments across the mainland.

Experts say that policymakers are manipulating the population structure with this latest rule change.

“We believe the real purpose of these measures is to control population inflows to prevent home prices from rising too fast,” said Zhang Hongwei, research director of Tospur Real Estate Consulting.

SOURCE: Property Report

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