Local Governments Cool Housing Markets with Rash of Sales Restrictions

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Municipal governments around China are striving to cool down overheating local housing markets with the introduction of heavy sales restrictions that expand the scope of property market controls.

At least 20 Chinese municipal governments have launched restrictions on the sale of newly purchased housing in the just the past two months.

Chengde in Hebei province and the ancient imperial capital of Kaifeng in Henan province are the latest jurisdiction to join their ranks, following the announcement on 15 May of prohibitions on the sale of properties for two to three years following purchase.

Housing market sales restrictions were first launched in Beijing on 17 March, with the introduction of provisions that prohibit companies from selling residential property for three years from the time of purchase.

The policy subsequently spread to other major cities such as Fuzhou, Guangzhou, Hangzhou, Qingdao and Xiamen, as well as expanded its scope from companies to individual owners.

The majority of the sales restrictions prohibit the transfer of newly acquired commercial housing for periods of between two to three years, although in some cases the prohibition phase can last for as long as five years, as is the case for purchases of housing by non-local residents in the city of Baigou Xincheng near Beijing.

In many cases informal mechanisms already exist that restrict the sale of recently acquired  housing, given that it can take as long as two years from the time of purchase to acquire the real-estate certificates required for subsequent transfer of properties.

The introduction of sales restrictions marks the expansion of government policies for controlling the property market from the purchase phase and transfer phase to the holding phase, by requiring that new owners retain their freshly acquired assets for a set number of years.

A recent research report from CRIC notes that “commercial housing sales restrictions in tandem with purchase restrictions and loan restrictions are becoming the long-term effective mechanisms for adjustment of the housing market,” with Chinese authorities seeking to uphold the core principle that “houses are used to live in, and not for speculation.”

The measures appear to be effective, with one seasoned housing investor from the Pearl River Delta region said to Caixin that the sales restrictions are already heavily restricting investment demand, due to concerns about its impact on short-term liquidity.

The total area of first-hand housing transactions plunged in some of the cities where the policy has been implemented, including Fuzhou, where it fell 63.27% compared to the preceding month, Xiamen, where it plunged 58.09%, and Guangzhou and Hangzhou, where the decline figures were 46.96% and 26.47% respectively.

 

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