Chinese Cities Launch Record Number of Property Control Policies in 2018

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Municipal governments around China unveiled nearly 200 property control policies in the first half of 2018, as Beijing seeks to ensure that homes are “used for occupation, not speculation.”

Data from state-owned media indicates that a total of 192 property control policies were launched around China by 73 municipal governments during the period from January to June, for an increase of 65% compared to the 116 policies unveiled in the same period last year.

These policies include 135 purchase restrictions, 176 loan restrictions, as well as 51 sales restrictions.

Multiple cities have imposed price controls, with Weihai and Liaocheng stipulating that the prices of new homes cannot be increased for a three month period, and the Yunnan province capital of Kunming mandating that applications for adjustments to the pre-sale prices of new homes can only be made following a six month period.

China’s municipal governments have also launched market controls directed at speculation, spurious administrative fees and “yin-yang contracts,” including Wuhan, Jiangmen, Foshan and Hainan.

The Chinese government’s efforts to cool down urban housing markets have also seen tighter curbs on lending and hikes to interest rates in the first half of the year.

First-tier cities took the lead in raising first home loan rates, with rates 10% above the benchmark now standard in cities such as Beijing, Guangzhou and Shenzhen.

Second-tier cities such as Chengdu, Hefei, Nanjing and Wuhan followed the lead of their first-tier peers in the second quarter, with the launch of tighter controls on property loans.

In Tianjin and Nanjing the first home loan rate is now 15% above the benchmark rate and the rate for pre-owned home loans is 20% higher, while in Wuhan and Ningbo the premiums stand at 20% for first home loans and 30% for pre-owned home loans.

In June the average rates for first-home loans and pre-owned home loans in China hit 5.64% and 6.01% respectively, for year-on-year gains of 15% and 10.7%.

The “2018 June Commercial Residential Sales Price Change Information for 70 Large and Medium-sized Cities” (2018年6月份70个大中城市商品住宅销售价格变动情况) released by China’s National Bureau of Statistics further indicates that in the month of June 61 cities saw year-on-year increases in the prices of new commercial residential property.

For China’s 31 second-tier cities new commercial residential prices and pre-owned home prices rose by 6.3% and 4.6% respectively.

Key first-tier cities saw ongoing new home price falls, however, with Shenzhen posting its 10th consecutive month of decline, Beijing its ninth consecutive month and Shanghai its sixth.

Analysts say that measures to control the country’s property markets will remain undiminished, given Beijing’s firm policy position that “houses are for occupation, not speculation.”

“At present, real estate controls have already fully covered third and fourth-tier cities as well as first and second-tier cities,” said Zhang Dawei, chief analyst for Centaline Property.

Zhang said that July would see the formal implementation of a significant number of property control policies that were unveiled in the first half, and that prices are on track to remain stable.

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