China’s property market has surged in recent years. After prices jumped 25 per cent in 2009 alone, the central government imposed austerity measures, including lending curbs, higher mortgage rates and restrictions on the number of homes each family can buy.
Beijing readies more curbs as prices resist policies
Bloomberg in Beijing
Beijing, which already has the mainland's strictest property curbs, is being forced to take additional steps to contain surging home prices as demands for record-high deposits fail to deter buyers.
The capital has enforced citywide price caps since March by withholding presale permits for any new project asking selling prices authorities deem too high.
Local officials will need further tightening as they struggle to meet this year's target of keeping prices unchanged from last year, said Bacic & 5i5j, the city's second-biggest property broker.
The failure of official curbs to stem price increases in the capital highlights the government's struggle to keep housing affordable as urbanisation sends waves of rural workers into the mainland's largest cities. New-home prices in Beijing rose 3.1 per cent in April from the previous month, the biggest gain among the four first-tier cities, and climbed by the most after Guangzhou last month, according to data provider SouFun. They rose in each of the first five months of this year.
"As the Chinese capital, and a city widely watched for the direction of property curbs, Beijing is under a lot of pressure to tighten further, as it's still leading price increases," said Luo Yu, a Shanghai-based analyst at CEBM, an advisory firm that covers industries including property. "More cities may follow suit with price caps."
As the mainland's economic growth moderates, the likelihood of monetary tightening or a nationwide property tax - dubbed "nuclear weapons" by Societe Generale - diminishes, leaving local authorities little choice but to tighten short-term price restrictions amid a worsening supply shortage.
New-home price gains in April, the biggest since they reversed declines in November, came even after April 8, when Beijing raised the minimum deposit on second-home mortgages to a record 70 per cent and banned single-person households from buying more than one residence.
Beijing, the mainland's third-most populous city, is the only city that enforces price caps in earnest, Bacic & 5i5j said. Guangzhou and Shenzhen are rejecting presale permits for some projects seen as too expensive, Luo said.
New-home prices in the capital, a city of 19.6 million, jumped 10.3 per cent in April from a year earlier, the biggest rise after Guangzhou and Shenzhen, the National Bureau of Statistics said on May 18.
Prices of existing homes jumped 10.9 per cent, the greatest gain among all the 70 cities tracked by the government.
A 1,679 square foot, three-bedroom apartment in Vanke Park No 5, on the north border of Beijing's central business district, has risen to about 6.4 million yuan (HK$8.1 million) from about 2.8 million yuan five years ago, according to Homelink Real Estate Agency.