The Chinese government is touting the effectiveness of what it refers to as the strictest property controls ever implemented in the country’s history when it comes to containing the country’s overheating real estate markets, as well as flagged more of the same in future.
Beijing launched its latest round of property market controls six months ago on 17 March, in order to contain burgeoning real state bubbles in China’s major urban centres.
Measures to control urban property markets included a rash of purchase restrictions, lending restrictions and sales restrictions directing at stifling demand during the early phase of the new policy setting, followed by increases to land supply and efforts to encouraging renting.
Official figures would indicate that the campaign has proven successful, with marked declines in growth rates for transaction volumes and prices.
The latest data from the National Bureau of Statistics indicates that national commercial residential sales floorspace and sales amounts for the first eight months of 2017 saw year-on-year increases of 12.7% and 17.2% respectively, for a deceleration of 12.4 percentage points and 8.8 percentage points compared to the peak period of January-February
According to government sources the ongoing slide in transaction volume growth has had a marked impact upon prices, and current policies are proving effective at gradually establishing real estate markets where both buying and renting play prominent roles.
They claim that excessively rapid growth in housing prices for first and second-tier cities has been effectively contained as speculative demand for homes sees sizeable declines, while the de-stocking of housing in third and fourth-tier cities is also making gains.
Housing price data for major cities would appear to vindicate these claims, with STCN.com reporting that new home prices in Beijing have failed to post month-on-month growth for the 11th successive month, while price declines for second homes in the nation’s capital are the highest in the country for the third successive month.
In the southern manufacturing hub of Shenzhen the average price for new home transactions have fallen for the 11th consecutive month, leaving the market in a state of trepidation.
“The current round of controls launched since 17 March have proven highly effective,” said Yang Hongxu, vice-head of the Shanghai E-House Real Estate Research Institute, to STCN.com.
“Both new and old hot-spot cities have cooled down to varying degrees, with Beijing and the surrounding area seeing the most pronounced cooling, because the controls implemented in the Jing-Jin-Ji conurbation have been the most effective.”
Yang notes, however, that other hot-spot cities such as the Zhejiang province capital of Hangzhou are struggling to contain overheating markets despite tightening of property controls, while many second and third-tier cities continue to see transactions flourish and prices rise despite the implementation of similar policies.
Domestic observers thus expect the Chinese government to either maintain or step up the current round of property controls across the near future.
Since July smaller urban centres including Dongguan, Ganzhou, Jiuguan, Lanzhou and Xi’an have further stepped up purchase restrictions, while China’s central government and banking regulator are cracking down on the illicit use of bank loans to pay for home down payments, in order to further curb speculative demand.
The Chinese government is also striving to expedite the growth of urban home rental markets in order to deal with burgeoning housing demand with the launch of pilot schemes in 12 major cities posting net population inflows
Ouyang Jie, a senior executive with Future Land Holdings, said to STCN.com that cooling properties involves targeting a range of factors.
“You have on the one hand the central government setting the theme that ‘houses are for living in, not speculation,’ the containing of asset bubbles, the promotion of property market controls by central government agencies and the tightening of monetary policy,” he said.
“You also have local government responding to their calls, maintaining the general situation and vigorous restricting prices.”
According to Yang Hongxu the current crackdown on the Chinese financial sector is a core factor behind the current cooling of China’s property markets, while efforts to expand home rental markets aren’t merely short-term policies but part of efforts to establish long-term effective mechanisms.