More mainland Chinese cities imposed a slew of additional restrictions on home purchases last month to curb runaway prices and speculation, damping developers’ sales outlook this year and highlighting the risks of overstretched finances in one of the pillars of the Chinese economy. At least 40 cities including Beijing and Guangzhou, and up to 11 second-tier cities imposed new purchase restrictions in March, according to a tally compiled by the South China Morning Post . Beijing announced nine successive directives in 10 days, while Guangzhou, Qingdao, Hangzhou, Xiamen and Fuzhou tightened their existing curbs twice in 10 days. “Beijing’s city government has been particularly harsh with its policies due to the political sensitivity of home prices in the capital city,” said David Hong, research head at the China Real Estate Information Corp. Property transactions have almost ground to a halt in Beijing, after the local authorities raised the minimum down payment on most homes to 80 per cent of the purchase price, banned the sale of an alternative home type to individuals and broadened the definition of second-time buyers to anyone with a mortgage record. Even Hangzhou, Xiamen, Qingdao and Tianjin have followed, defining anyone with mortgage history as a second-time buyer, hence forcing them to pay more as down payment. The local authorities of Guangzhou, Xiamen and Hangzhou created a new policy tool, allowing homes to be sold only after they have been owned for two or three years. The ever-tightening range of property rules increasingly resembles an administrative whack-a-mole, whereby regulatory loopholes are hastily closed before speculators spot another. A Guangzhou government directive on March 17 was the butt of local jokes, as it left out two satellite cities from the new regulations, a lapse that was patched up only two weeks later. In Foshan, property speculators flocked to a suburban district and snatched all 700 homes available for sale within an hour because the district was initially excluded from purchase restrictions, according to local media. China’s housing ministry cited Beijing’s price curbs as exemplary, to be emulated by other local authorities. The second-hand market for homes will be the next target for “urgent” action, the ministry said in a teleconference hosted last week. Financing is not on developers’ side either. The central bank’s monetary tightening policy pushed wholesale funding cost in China’s interbank market to a record in March, and is expected to affect loan pricing. What’s more important, banks have followed the central bank’s guidance to limit mortgage growth, capping households’ ability to purchase homes. Last year, a record 5.68 trillion yuan (US$824.6 billion) of new mortgages were extended, accounting for 45 per cent of total new loans, fuelling the spectacular rally in property market. Some real estate tycoons have openly voiced their pessimism for this year. Sun Hongbin, chairman of Sunac China, a top developer known for its aggressiveness, said in a press conference that Sunac has stopped acquiring land through auctions since last October. “This round of policy control has a particularly far-reaching effect on the market,” Sun said. “Sales will be severely impacted in the second half, and I am very negative on the market as a whole.” He said the expensive land price is eroding developers’ profitability, and elevated the risks. Many developers privately complained that the local governments are forcing them to sell their properties below a guideline price, regardless of how much they paid for the plots previously. Hong said the price cap made developers reluctant to open sales of projects, further squeezing the supply. “If developers can withstand the cash-flow pressure, they can wait till a better time to open sales. If not, they have to sell at a compromised price,” he said. Zhu Xu, board secretary of China Vanke, said during a press conference that last year’s thriving property market masked many hidden risks. The company has reserved 1.38 billion yuan for possible losses due to home price decline in 12 cities. The provision is up 82.3 per cent over 2015, he said.