Shanghai steps up property curbs for the third time this year
City officials are under huge pressure from Beijing to bring down home prices
Shanghai municipality has stepped up curbs on property purchases for the third time this year, amid central government discontent that the city’s home prices have not fallen since the last tightening in October.
Under a new round of regulations announced on Monday night, buyers in Shanghai who have no homes already in their name, but are in possession of mortgage records, will no longer be considered as “first-time homebuyers”. That would make them ineligible for the more lenient down payment requirement normally offered to first-time buyers.
This is a departure from the previous policy, under which buyers with no property under their names were classified as “first-time homebuyers”, regardless of whether they had a borrowing history.
The new regulations put Shanghai on a par with Beijing in terms of the level of restriction introduced into the market in an attempt to rein in skyrocketing prices.
The down payment for “first-time homebuyers” has been raised from 30 per cent to 35 per cent, according to a Shanghai government statement outlining the new policies. Minimum down payment for second-time homebuyers of ordinary homes was raised to 50 per cent, and 70 per cent for non-ordinary homes.
Under existing rules, homes that have a plot ratio of less than 1, are larger than 140 square meters, or are 20 per cent more expensive than the city’s guidance prices would be classified as “non-ordinary homes”. This stipulation puts the majority of private homes changing hands in the city in the “non-ordinary” category.
People who borrow from provident funds to buy homes also face tighter rules.
“The latest tightening is not a surprise, as the October tightening slowed the price gain but failed to slash the price,” said Lu Wenxi, a researcher with Centaline Shanghai. “The policy that checks both homebuyers’ existing homes and borrowing records will particularly hit the trade-up demand, which is the majority of demand in the Shanghai market.”
Shanghai on March 25 became the first Chinese city to reverse its policy direction by raising the required down-payment ratio. Property sales fell and price growth moderated briefly before rebounding again since June.
This forced the city to impose the second round of tightening on October 9. Home sales fell in October and November. Month-on-month price growth also eased to 0.7 per cent in October from 3.2 per cent the previous month, according to the National Bureau of Statistics.
However, that failed to satisfy central government. A leaked document before the National Day Holiday showed that the Politburo had demanded the 16 cities with runaway prices achieve month-on-month price declines. According to a Caixin report, top authorities in early November ordered that home prices should drop in November from October. Local officials who failed to achieve that would be held accountable.
That appears to explain why Shanghai, Hangzhou, Shenzhen, Wuhan and Chengdu have all stepped up their tightening measures in the past week. On Monday night, Tianjin also raised its down-payment ratio for first-time homebuyers to 30 per cent.