China tightens property market further
China launched a fresh round of property tightening measures before National Day on October 1, in response to the recent pick-up in property prices and to prevent a possible buying frenzy during the long holiday.
Commercial banks have been ordered to stop lending for third and subsequent home purchases, according to a statement issued by People’s Bank of China (PBOC). Downpayment requirements for first-time and second-time home buyers are raised to 30% and 50% respectively. Banks need to prevent consumer loans from being used for home purchasing.
PBOC has ordered banks to stop lending to land hoarders and property developers that have changed the use of acquired land, have delayed the commencement or sale of projects. In contrast, the central bank encourages banks to finance small- to medium-sized housing projects and affordable homes.
The announcement of the tightening measures came on the back of recent calls and rhetoric from different government authorities, showing determination to curb runaway property prices and to secure affordable housing for the masses. Mainland property stocks have been under pressure recently on the speculation that more real estate policies will be announced.
The government cancelled certain tax breaks for home buyers and sellers to curb speculative demand for real estate, according to a statement issued by the Ministry of Finance on September 28. The statement emphasizes that a pilot programme on property tax will be introduced in selected cities before being expanded to the rest of the country.
According to the National Bureau of Statistics, property prices in China’s 70 major cities recorded a year-on-year growth of 9.3% in August, down from 10.3% in July and the slowest growth so far this year. However, month-on-month figures for property prices remained unchanged for July and August after a small decline in June.
For newly constructed properties under 90 square meters, prices jumped 15.6% in August year-on-year, although the month-on-month increase is only 0.1%. The government has implemented the first round of tightening measures in April, which effectively curb property prices and cool property transactions.
Besides targeting home buyers, the government has launched measures to ensure a stable supply of land and properties. Developers will be banned from bidding for more land if they have land idle for more than one year, illegally transferred land, or developed land in breach of agreements, according to a statement jointly released by the Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development on September 29.
China’s property market has experienced a strong rebound since the second half of 2009, driven by both real demand and abundant liquidity. Under the long-term urbanization trend and renminbi appreciation, many investors still hold a positive long-term view on China’s real estate market. The government stresses that the tightening measures are aimed at achieving the healthy and sustainable growth of the country’s property market, while securing affordable housing for its large population.