More Than 30 Chinese Cities Impose Sales Restrictions to Cool Housing Markets

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A slew of major Chinese cities have launched new sales restrictions on real estate transactions less than a week following the release of key April housing price data by China’s National Bureau of Statistics.

The Hunan province capital of Changsha, as well as Wuxi, Jiaxing and Baoding, have all launched onerous restrictions on the sale of recently purchased property, bringing the total number of Chinese cities to implement such policies to over 30.

The Hebei province municipality of Baoding, situated very close to Beijing, has become the first local government ever to introduce a sales restriction on land as opposed to residential housing, mandating a transfer prohibition timeframe for as long as decade for certain plots.

Changsha’s department of housing and construction temporary prohibited the sale of commercial property by local residents with two or more residential homes in the purchase-restricted part of the city, or the sale of commercial property by non-local residents with one or more residential homes.

Wuxi in the south of Jiangsu province has temporary property sales by non-local residents who own one or more homes, as well as prohibited the transfer of newly purchased residential property for at least two years from the time that immovable property ownership certificates are obtained.

Nearby Jiaxing municipality in the north of Zhejiang province has introduced similar measures to Wuxi, prohibiting the sale of residential homes by non-locals for at least two years following purchase.

Since the start of the year sales restrictions have emerged as a highly popular means for municipal governments to clamp down on overheating property markets within their local jurisdictions.

Several dozen municipal governments have already introduced real estate tightening policies this year, with many such as Beijing and Chongqing further expanding their purview in April and May.

Speaking to Economic Information Daily, Zhang Dawei, chief economist for Centaline Property, said that sales restrictions were a fundamental means used by the government to deleveraging housing markets.

“When transaction times are extended, it becomes to hard to accept high leverage costs,” said Zhang. “As a consequence, this encourages homebuyers to allocate capital for their own use.”

While the latest data from China’s National Bureau of Statistics indicates that the introduction of sales restrictions in major cities has proved effective are tamping down prices in property markets, it’s also had the effect of driving investment to third and fourth-tier urban centres, who tended to post stronger price growth in April than their larger peers.

Zhang Dawei expects, however, third and fourth-tier cities to rapidly follow the lead of China’s largest urban centres when it comes to housing sales restrictions.

Data from Centaline property indicates that over 30 Chinese cities have now launched sales restrictions to cool housing markets, including Chengdu, Xiamen, Fuzhou, Qingdao, Hangzhou, Guangzhou, Zhuhai, Huizhou, Yangzhou, Changzhou, Chengle, Minhou, Xushui, Qidong, Baigou, Sanye, Haokou, Dongguan, Xi’an, Zhengzhou, Gaobeidian, Kaifeng, Nanjing, Chengde and Beijing.

Centaline property expects that as many as 50 cities could eventually atop sales restrictions, on top of the 30 that have already implemented such measures.

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