From March 30th to April 1st, a wave of new property regulations under the "Guowu" (State) policy swept across major Chinese cities including Beijing, Shanghai, Shenzhen, Guangzhou, Tianjin, Chongqing, Nanjing, Dalian, Jinan, Hefei, Xiamen, and Qingdao. These measures sparked widespread public discussion, especially around issues like the 20% personal income tax on property sales, higher down payment ratios for second homes, interest rate adjustments, and restrictions on new home prices.
For instance, Beijing's "Five-Article Rule" introduced stricter conditions, requiring individuals to purchase only one residential unit, increasing the down payment ratio for second homes, and applying different rules based on when the property contract was signed. In Shanghai, the focus was on tightening credit policies, with enhanced scrutiny on foreign buyers, divorce cases, and young borrowers, while also banning loans to those who don’t meet credit standards. The city also imposed stricter rules on third or more home purchases.
Guangzhou continued its existing purchase and price control policies, pushing for housing information sharing among provincial cities within the year. Meanwhile, cities like Jinan, Nanjing, and Qingdao required that the price increases for new housing be lower than the growth in urban residents’ disposable income. In Chongqing, the rules went even further, prohibiting pre-sale permits for commercial projects that exceeded pricing limits.
This round of “central-local coordination†in real estate regulation has been seen as a strong move to curb rising house prices. It reflects the government’s firm commitment to maintaining the stability achieved through previous regulatory efforts. As local governments implement these policies, the steel market is expected to feel the effects, particularly in the construction sector.
From a demand perspective, the strict controls on new housing prices are likely to dampen developers' enthusiasm for new projects, directly impacting the volume of new construction. This could lead to reduced demand for construction steel, especially in second-tier cities where the effect might be more pronounced. With construction steel making up about 50% of total steel consumption, and real estate accounting for over 60% of that, any drop in demand from this sector will have a significant ripple effect across the entire steel industry.
Moreover, the tightened regulations have worsened market expectations, leading to a more pessimistic outlook for the steel market. This negative sentiment may further weaken steel prices. However, it's worth noting that most regional regulations still target the second-hand housing market more than the new housing market, which could help maintain some demand for new properties.
In addition, policies promoting affordable housing, slum renovation, and the supply of ordinary commercial housing land have been strengthened, potentially encouraging developers to continue building. While price suppression is evident, the overall enthusiasm for new developments may not decline sharply, supported by the push for affordable housing. This could result in construction steel demand remaining stable, if not growing, compared to previous years.
In the short term, as spring weather improves and construction activities pick up in April, there may be a seasonal rebound in demand. However, with ongoing property market regulations, long-term demand for construction steel is likely to be constrained, and market confidence may remain weak, limiting any potential price recovery.Wire Mesh: Wire mesh refers to a grid-like structure made from intersecting wires. It can be constructed using various materials, such as stainless steel, galvanized steel, or aluminum. Wire mesh is available in different mesh sizes, wire diameters, and weave patterns (such as square or rectangular). It serves a wide range of purposes, including filtration, screening, reinforcement, and containment.
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