China property

Shanghai cracks down on home purchases by companies in latest bid to curb prices

The new rules close a loophole whereby residents could avoid other property purchase restrictions by setting up a company to buy a home

PUBLISHED : Tuesday, 03 July, 2018, 9:48pm
UPDATED : Tuesday, 03 July, 2018, 11:05pm

Authorities in the Chinese city of Shanghai have tightened rules on companies buying property in their latest attempt to curb runaway housing prices.

According to the Shanghai Commission of Housing and Urban-Rural Development, companies with less than five years of operations will be barred from buying homes in the city, effective from Tuesday. At the same time, corporate buyers will not be eligible for home purchases unless their total tax payments have surpassed 1 million yuan (US$150,375).

“The move is aimed at better policing corporate purchases of properties,” the commission said in a statement.

Shanghai is following in the steps of Hangzhou, capital of the eastern Zhejiang province, which in late June suspended all purchases of new and secondary residential properties by corporate and institutional buyers.

Previously, an individual buyer with a Shanghai household registry was able to sidestep the city’s restrictions on home purchases by setting up a business and using it to buy a residential flat.

“The new rule targets those who deliberately set up a company to buy a residential home,” said Yan Yuejin, director of E-house China R&D Institute, a market intelligence firm. “It is a fresh sign that Shanghai officials are focusing on housing market stability.”

The city’s property prices surged more than 100 per cent between 2015 and 2016, prompting the authorities to take a series of measures to cool the market, including increasing mortgage down payments, raising the threshold for home purchases by non-locals and tightening oversight on financing through the shadow banking system.

The only way to buy property in Shanghai these days is to win the lottery

Potential buyers welcomed the new rules, noting that the lottery system that is increasingly used to sell new homes in the city – because demand usually exceeds supply – was open to abuse, with companies often making a large proportion of lottery entrants.

“It is good news that the Shanghai government has finally noticed the loophole and amended the rules,” said Chen Xiaoping, a 55-year-old retired dentist, who recently failed to win the right to buy a new home in a lottery.

“Our chances of owning a new flat in this city have increased now that those shell companies are being kicked out by the government.”

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