A report on Shenzhen’s frenzied housing market by the government-run news agency Xinhua on Wednesday warned of increasing leverage risks and called for further tightening measures to rein in the market.

Shenzhen has seen home prices skyrocket 72 per cent in the past 12 months, to a record 48,095 yuan per square metre in February, according to Shenzhen government data – more expensive than in Shanghai or Beijing.

Financial institutions should tighten the credit, that would be the most effective measure
Wang Feng, Shenzhen Real Estate Research Centre

Speculative practices had flooded the market in Shenzhen, Xinhua said, with investment accounting for 25 per cent of total home buying, up from 10 per cent in October in 2014.

Shenzhen’s average mortgage ratio was 65 per cent in December last year, the highest among mainland China’s first-tier cites.

Apart from bank loans, Xinhua found that investors had resorted to many highly leveraged financing products, such as crowdfunding and peer-to-peer (P2P) lending, to receive credit for down payments.

“Financial institutions should tighten the credit, that would be the most effective measure,” Wang Feng, director of the Shenzhen Real Estate Research Centre told Xinhua. “Further restrictions on home buying are also possible.”

While most mainland cities are grappling with an oversupply of homes and a lack of demand, prompting the central government to issue a string of easing policies in an effort to boost sales, tier-one cities are looking for way to cool overheated markets.

Shenzhen’s mayor said last month the city government was studying tightening measures to make sure prices stabilised in a reasonable range.

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