Beijing imposes stiff rule to fight rising property prices

PUBLISHED : Thursday, 17 February, 2011, 12:00am
UPDATED : Thursday, 17 February, 2011, 12:00am

Beijing will require non-local residents to prove they have paid taxes in the city for five years before they can buy a home there - the strongest measure it has taken so far to curb runaway prices in the capital.

'The rule will pour cold water on the market immediately since non-local residents account for about 60 per cent of the capital's transactions,' said Kenneth Pak Kei-yuen, a senior general manager in the Beijing office of Hong Kong estate agency Midland Realty.

Other cities require homebuyers who are not local residents to produce proof they have paid at least one year of taxes, but Beijing is the first to demand five years of records in its effort to prevent a housing bubble.

Following the State Council's call to cool the overheated market, the capital will also ban non-local residents from buying second homes and prohibit local residents buying more than two flats, China Central Television reported yesterday.

Pak said the volume of property sales in Beijing this month was down 60 per cent from last month.

'It is the harshest measure to curb property investment,' said Dickson Wong Hung, the chief executive for the mainland of another Hong Kong agency, Centaline Property. 'Even if you want to buy with cash, you are not allowed to do so if you have exceed the limits on home purchases.'

Wong said the move would affect the prices of luxury homes, which rose 30 per cent last year.

He said that, given the limited investment options for mainlanders, the Beijing market had seen an influx of capital from the nouveaux riches in places such as the coal-rich province of Shanxi.

'Some [investment] has even come from Inner Mongolia. Beijing is their favourite investment destination,' he said.

Last month, the State Council announced policies aimed at curbing property demand and prices, including raising the down payment on second homes to 60 per cent of the sale price, from 50 per cent previously.

Late last month, Shanghai and Chongqing introduced property taxes to slow the growth in prices.

Last week, the central bank raised lending rates by 0.25 percentage point - the third increase since October last year - to combat rising inflation and rein in home prices.

Mainland property stocks fell across the board in Hong Kong yesterday on news of Beijing's curbs.

Longfor Properties dropped 4.01 per cent to close at HK$10.54, Shimao Property Holdings 1.96 per cent to HK$11, Agile Property Holdings 1.43 per cent to HK$11.04 and China Overseas Land & Investment 0.9 per cent to HK$13.14.

'Mainland property stocks are trading in a volatile way in response to central government policies,' said Conita Hung Lai-ping, the head of equity research at Delta Asia Financial Group.

Hung said investors were becoming cautious because mainland bank lending was lower than expected last month, and any tightening on lending could dampen buying interest.

Mainland banks granted 1.04 trillion yuan (HK$1.23 trillion) in loans last month, 25.2 per cent less than in January last year.

Samsung Securities (Asia) property analyst Alan Jin said Beijing's move was aimed at curbing investment demand for luxury homes.

But despite the central government's cooling measures, property prices had shown no sign of falling so far, he said.