China’s Ministry of Housing and Urban-Rural Development (MOHURD) has met with a total of 12 municipal governments from around the country in order to emphasise the need to maintain tight controls on local real estate markets.
MOHURD officials just recently met with officials from the local governments for Chengdu and Taiyuan, while just prior to that they engaged in discussions with representatives from the municipal authorities for Xi’an, Haikou, Sanya, Changchun, Harbin, Kunming, Dalian, Guiyang, Xuzhou and Foshan.
The Xinhua News Agency reports that during these meetings MOHURD further reiterated its stance that the real estate control policies will not be relaxed.
MOHURD’s discussions with local government focused on the the need to firmly establish the “four awarenesses” (四个意识); uphold the principle that “houses are for occupation and not speculation”; keep real estate market control targets unchanged,as well as implement a system of local responsibility for controls, with tailored restrictions to suit specific cities and targeted policy implementation.
China’s municipal governments first began to launch real estate market controls in early 2017, with measures including sales restrictions, purchase restrictions and caps on property-related lending by banks.
While the property controls have proved largely effective at containing price gains and transaction levels in China’s urban centres, concerns emerged early in 2018 that some municipal governments were attempting to dial back the restrictions under the pretext of competing for human capital.
Analysts point out that many of the municipal authorities summoned to met with MOHURD are host to hot-spot property markets, and can be expected to further step up local real estate controls in the wake of discussions.
Data from the National Bureau of Statistics indicates that Haikou saw new housing prices rise by 2% month-on-month in March, while Harbin and Kunming have also seen some of the most rapid housing price increases out of 70 large and medium-sized cities around China.
Yan Yuejin (严跃进) said to 21st Century Business Herald that the policy discussions “can be interpreted as a form of window guidance, and a method of control which is comparatively indirect, but whose influence and results are quite strong.”
Gu Yunchang (顾云昌), vice-chair of MOHURD’s specialist committee, said that this is far from the first time that the authority has summoned local governments for meetings, pointing out that similar discussions were held with municipal authorities and major real estate enterprises during peaks in the real estate market in 2013 and 2016.
The goals of those discussions were to prevent excessively rapid rises in real estate prices, stabilise the housing market, and indirectly spur local government to launch new policies.
Gu points out that the 12 hot-spot cities who have just met with MOHURD for talks are already implementing “purchase restriction, loan restriction, sales restriction and price restriction” policies of unprecedented vigour, that the focus will be on ensuring that they are effectively implemented or adjusted.
Another focal point for control policies will be the inversion in prices for new and pre-owned homes in some hot-spot second-tier cities as a result of price controls.
Since the start of 2018 many Chinese cities have imposed housing price controls, with a report released by Lianjia at the start of April stating that this has led to prices for new houses being lower than those for pre-owned homes in some areas, leading to intense competition for “non-market prices” from buyers.
The problem is most pronounced in the major inland cities of Chengdu and Changsha, where 88% and 87% of local Lianjia agents respectively reported that price inversion was an issue in their areas.