Cities Across China Wind Back Property Market Control Policies

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Chinese cities are rolling back some of the property market control policies launched at the central government’s behest last year, claiming that the measures are intended to shore up their appeal to skilled personnel.

Towards the end of 2016 China’s municipal governments began to introduce property market controls, such as purchase and sales restrictions and lending quotas, in a bid to contain overheating housing prices.

While the measures proved effective at containing transaction levels and price growth in 2017, many municipal government now appear intent on winding back the policies under the pretext of striving to attract human talent.

Zhang Dawei, chief analyst with Centaline Property, said to Securities Daily that it was primarily second and third-tier cities measures that had loosened property restrictions or provided home purchase subsidies as part of ostensible efforts to attract talent.

In first-tier cities purchasing restrictions remain strict while housing prices are still stubbornly high, further heightening the appeal of second and third-tier cities where housing prices are comparatively low and market controls are being loosened.

Data from Centaline Property indicates that in the three months since October around 20 cities across China have issued new property policies to attract talent, including the provincial capitals of Hefei, Nanjing, Lanzhou and Zhengzhou.

Nanjing, for example, issued the “Implementation Opinions on Further Strengthening the Settlement of Human Talent” (关于进一步加强人才安居工作的实施意见) on 7 January, which stipulate that high-level personnel can access loans of up to 1.2 million yuan from public funds, and will not be subject to household registration restrictions when purchasing their first homes.

The Opinions further stipulate that the rental home subsidy period will be extended to five years for tertiary graduates.

In the same month the Guangdong-province manufacturing hub of Dongguan announced the provision of a maximum home purchase subsidy of 2.5 million yuan to “special-level talent”  in the city.

In addition to providing housing subsidies, however, many cities are rolling back the purchase restrictions and other measures that lie at the core of their property control policies.

Lanzhou, the capital of Gansu province, is the first Chinese city to dial back restrictions on home purchases, while the Anhui-province of Hefei has cancelled price controls, allowing developers to freely price commercial housing.

One government source said to Securities Daily that behind the ostensible human resources goal of the policy adjustments, a key motivation for local governments was the sizeable contraction in land transfer fees, as well as the revenues due to the drop in housing transactions.

According to the source the loosening of property restriction policies in some cities is for the purpose of ” enabling rapidly contracting markets to recover to their normal transaction levels.”

Data from Fang indicates that while the land transaction sum for Lanzhou nearly halved in a mere two years period, falling from 12.524 billion yuan in 2015 to 6.668 billion yuan in 2017.

In the Jiangsu province capital of Nanjing housing transactions fell to 62,000 in in 2017 from 128,000 the preceding year, while the Anhui province capital of Hefei saw new home transaction volumes post a year-on-year decline of 73% in 2017.

According to Centaline Property’s Zhang Dawei the current trend for property control policy will be loosening in places with excessive home inventories, and intensification in those areas with low inventories.

Zhang points out that in some cities property control policies are already excessive and do not need to be further intensified, but that in 2018 risk in third and fourth-tier Chinese cities remains considerable.

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