Fifth Round of Housing Controls Kicks off, Shenzhen Targets Yin-Yang Contracts


A slew of municipal governments around China are launching a fresh set of housing policies in what observers are calling the fifth round of real estate market controls, while Shenzhen is taking the lead in combating “yin yang contracts.”

At least 15 cities around China have launched a fifth set of housing market controls, with the latest policies including stricter home purchase restrictions.

According to analysts the new policies are primarily concentrated in China’s more popular urban centres.

“Cities that have recently unveiled housing market control policies are mainly concentrated in hot-spot first-tier and second-tier cities,” said Zhang Bo, chief real estate analyst with 58 Anjuke, to Securities Daily.

“Within the short-term these cities will see controls continually tighten, with Dalian unveiling purchase restriction policies, and Hangzhou add a lottery system for home purchases.”

According to Zhang growth in housing prices in first-tier and some hot-spot second-tier cities is set to markedly weaken in 2018, as the Chinese government continues to uphold the principle that “houses are for occupation, not speculation.”

Third-tier, fourth-tier and some hot-spot county-level cities can expect to see further modest gains in housing prices, under the influence of “destocking” policies continue.

Chinese cities first began to launch housing market control policies in March of 2017, as part of efforts to contain overheating property prices with a range of measures including purchase restrictions, sales restrictions and lending curbs.

In addition to purchase restriction policies, municipal governments are now trying to satisfy inelastic demand for homes with the launch of “preferential purchase” policies by cities such as the Hunan province capital of Changsha.

Yan Yue (严跃) of the Shanghai E-House Real Estate Research Institute said that preferential purchase policies complement purchasing restriction policies to jointly comprise differentiated purchasing policies, and ensure that inelastic housing demand can be effectively met.

According to Yan the “One Restriction and One Preference” policy could become the mechanism for determining home purchasers in certain cities with comparatively modest housing stocks.

Shenzhen municipality has also drawn attention with the launch of a “Three Unified Prices” (三价合一) policy, in order to combat widespread, fraudulent property transactions involving the use of “Yin Yang” contracts.

Yin Yang contracts” refers to the drafting of real and fake sets of agreements simultaneously, in order to use them for separate purposes and dodge tax requirements or regulatory restrictions on lending.

Shenzhen’s new “Three Unified Prices” policy means that when commercial banks in the municipality process housing loans, they must use the lower out of the online contract registration price and the bank loan valuation to calculate the final lending amount.

In addition to ensuring that the real transaction price, the loan valuation price and the online contract registration price are consistent, the Three Unified Prices policy is expected to bring an end to pre-owned home prices “falling ostensibly yet rising in secret.”

Zhang Bo expects Shenzhen’s new policy to be employed by cities around China, given how widespread the use of yin yang contracts has become.

“Looking at things nationally, hot-spot first-tier and second-tier cities significantly suffer from inconsistencies between the ‘three prices,'” said Zhang. “I expect that other hot-spot cities will follow suit.”