china property

Removing housing curbs not likely in first-tier cities in 2015

“The first-tier cities need to wait for a longer while and (home purchase restrictions) will not be scrapped any time soon,” said Wang Lina, a senior researcher at the Chinese Academy of Social Sciences, a top government think tank in Beijing

PUBLISHED : Tuesday, 06 January, 2015, 10:18am
UPDATED : Tuesday, 06 January, 2015, 10:18am

Speculation the mainland will eventually remove home purchase restrictions in the four first-tier cities of Beijing, Shanghai, Shenzhen and Guangzhou have never died down. But this will not happen in 2015, some industry experts say, despite rising expectations it may soon take place.

China imposed controls on how many homes each family can buy in May 2010 as part of its efforts to rein in runaway housing inflation. Since mid-2014, such heavy-handed restrictions have gradually been phased out in all but these four cities and Sanya on the tropical island of Hainan, given an industry downturn induced by tight credit and a heavy housing glut.

New versions of how the four cities will tweak purchase restrictions reemerged recently.

“The first-tier cities need to wait for a longer while and (home purchase restrictions) will not be scrapped any time soon,” said Wang Lina, a senior researcher at the Chinese Academy of Social Sciences, a top government think tank in Beijing.

“Other policies can be relaxed (to stimulate demand),” she told the South China Morning Post, suggesting the removal of the 20 per cent income tax for families selling a small flat to immediately buy a bigger one as no capital gain will occur during the upgrade.

But a group of researchers from the same think tank published a report last month predicting that the property downturn will continue in 2015 and Chinese government will add policy support, including eliminating home purchase restrictions in all cities.

Beijing last week raised the maximum mortgage from the local housing provident fund to 1.2 million yuan (HK$1.52 million) from the previous 1.04 million yuan. Its home purchase restrictions, the most severe across the country, remained unchanged.

There are also swirling reports, yet to be confirmed, that Guangzhou and Shenzhen will scrap home purchase restrictions before the end of this month.

Meanwhile, Shanghai’s housing bureau denied the latest rumours it could scrap bars against local families’ purchase of third homes and non-locals’ buying of second homes in the city before the end of March.

That has failed to cool down some analysts’ expectations that mainland authorities will call a complete end to such measures this year in a reformist gesture to let the housing market play by its own rules.

Most Chinese developers have since last year turned back to first-tier cities despite sizzling land prices, burdened with huge oversupply from their venture into small cities in the previous two years.

Nicole Wong, regional head of property research at CLSA in Hong Kong, said these cities could partially eliminate restrictions. For example, Beijing could allow home purchases by non-locals if they have paid social insurance for two or three years, down from five years now.

“A complete removal will be a bit too drastic,” she said. “New supply is not a lot this year, so if demand increases too quickly, developers will be unable to replenish their pipelines in a timely manner.”

That is what happened in 2010 when short supply pushed home prices to a new record after an industry slowdown during the global financial crisis.

business-article-page