The number of Chinese cities imposing restrictions upon property sales is expected by analysts to rise to over 50, as the central and municipal governments strive to stymie speculation-fuelled real estate bubbles.
Starting in March this year Beijing took the lead in the launch of property sales restrictions, with data from Centaline Property indicating that by May nearly 30 Chinese cities had followed its lead with the implementation of similar measures.
Towards the end of last week a total of six provincial capitals joined the list of Chinese cities imposing property sales restrictions, including Changsha, Chongqing, Guiyang, Nanchang, Nanning and Shijiazhuang.
Nachang, Chongqing and Guiyang had no property sales restrictions in place previously, while Changsha has tightened its sales restrictions policy.
These cities have since been joined by the Hubei province capital of Wuhan, the southern Jiangsu city of Wuxi, and the Shaanxi province capital of Xi’an, bringing the number of Chinese urban centres to launch property sales restrictions since 22 September to nine in total.
According to data from Centaline Property these cities have seen some of the most rapid gains in both new and second-hand home prices across recent months.
Prices for new homes in Nanchang saw a month-on-month increase of 0.9% in August, while for Guiyang and Naning the figures were 0.7% and 0.6% respectively.
In Xi’an second-hand home prices rose by 0.9% month-on-month, while in Chongqing and Wuhan the growth figure was 0.8%.
The latest round of property sales restrictions prohibit the re-sale of newly purchased homes for periods of between two and five years from the date that title is obtained.
According to domestic analysts property sales restrictions lie at the core of China’s current round of real estate market controls, with the chief goal of curbing speculative investment and stabilising expectations by constricting transaction volumes and liquidity.
The policies are expected to rapidly expand from the provincial capitals to third and fourth-tier cities, potentially bringing the total number of Chinese municipalities with property sales restrictions in place to over 50.
Zhang Dawei of Centaline Property said to 21st Century Business Herald that sales restrictions are a new part of the 2017 round of real estate tightening policies, and are in essence a short-term mechanism whose goal is to curb speculative investment.
Sale restrictions are essentially property market deleveraging policies, which require that home buyers make use of the real estate assets they purchase themselves.
A 3 – 5 year transaction cycle is unlikely to attract highly leveraged investors, reducing the speculative potential of property investment by constraining the ability to obtain short-term returns.
According to Zhang there are currently over 45 cities in China that implement property sales restrictions policies.
Data from the China Index Academy (国指数研究院) indicates that more than forty cities have property sales restrictions of varying degrees in place.
Baoding, Chengdu, Chongqing, Dongguan, Fuzhou, Guangzhou, Hainan province, Jinan, Nanning, Qingdao, Taizhou, Xiamen and Xuzhou all stipulate that newly purchased homes cannot be placed back on the market within two years of obtaining title.
Changsha, Chengdu, Guiyang, Kaifeng, Nanjing, Zhangjiakou and Zhengzhou impose a sales restriction for a three year period, while the Hebei province capital of Shijiazhuang imposes the strictest restriction, prohibiting re-sale of both new commercial apartments and second-hand homes for a five year period.
Chinese regulators appear highly determined to curb the country’s regional real estate bubbles.In addition to property sales restorations, policymakers have also driven the rates for first home loans to unprecedented highs in order to deter speculative investors from accessing bank financing.
Analysts expect property tightening policies to intensify further. Pan Xiangdong of Xin Shidai Securities (新时代证券) said in a note released on 24 September that the government is continuing to increase is control of property prices, and that the pace of short-term housing price increases will further ease, which will impact investment in development via sales.
Real estate investment growth has been in decline since April, and is expected to fall significantly by the year’s end despite short-term stabilisation in August.