China property

China property: Rumours of more tightening measures, as China developers softened notably in the afternoon on the back of rumours that presales will no longer be allowed. In fact, a report published by China Academy of Social Sciences on 23 July suggested suspension of presales, as well as removal of interest discount to first-home buyers and imposing more taxes. UOB Kay Hian note that an outright suspension of presales is not practical, as over 80% of the residential units are presold before their completion. Forbidding presales will only squeeze supply, forcing prices up. Hence, at most there could be some moderate changes to the presale rules, targeted at restricting speculative demand. Noises of further tightening have escalated in recent days, causing share price correction. At this juncture, house still don't think China is ready to bring out new property policies yet as underlying economic growth is still weak. But the central government has been trying to manage expectations by balancing what they do (liquidity easing) with lip service. That said, the 100-city price index released yesterday showed a 0.33% mom rise in July, not only the second consecutive month of increase, but also at a faster rate than the 0.05% recorded for June. This is not a good sign.