Guangzhou further eases housing restrictions, sets stage for more mainland China cities to loosen curbs

The mainland Chinese city of Guangzhou, one of the country’s largest, further eased housing restrictions on Monday, five days after it scrapped a ban on sales of apartments to individuals.

The city authorities said in a document that Guangzhou residents who had paid towards a housing provident fund policy could withdraw money for buying homes for living in nearby cities such as Foshan and Dongguan.

Guangzhou becomes latest mainland China city to ease curbs on apartment sales

Such a fund is meant to help middle and low-income residents buy homes. Employers and employees are required to make a deposit in an account every month, and when an employee buys a home they can withdraw cash from the account and apply for a low-rate loan. Most contributors, including those in Guangzhou, could only withdraw cash when they bought homes locally, before the policy change.

“The change is a nod to the fact that more people working in Guangzhou, who cannot afford homes in the city, have to buy homes in nearby smaller cities,” said Yan Yuejin, research director at E-House China R&D Institute. “In effect, it will be a bonus for the property markets in nearby cities.”

The easing of the housing provident fund policy comes after the Central Economic Work Conference, an annual gathering of China’s senior policymakers that sets out the government’s economic direction for the following year, which was held last week.

The conference adopted a pro-growth tone by announcing a more accommodative monetary policy and a proactive fiscal policy, which includes more tax cuts, to support flagging economic growth. A statement released after the gathering omitted previous mentions of a “crackdown” on home price increases, and granted local governments the power to make their own property market policies based on their respective situations.

China’s ministry of housing and urban-rural development on Monday said in a conference, which was held to discuss the implementation of the direction set by the CEWC, that it would work to “keep land prices, home prices and market outlook stable”.

And analysts are now convinced more cities will follow Guangzhou and Zhuhai in scrapping non-critical restrictive measures, such as the housing provident fund. Critical measures, such as the minimum down payment required, are expected to stay in place.

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“We are close to a nationwide property market easing, but we are not quite there yet,” said Lu Ting, chief China economist at Nomura. “We believe we will need to wait for another two quarters before major nationwide property easing measures, including scraping price controls and easing restrictions on home purchases, especially in tier 1 and 2 cities.”

Chen Tiancheng, a property analyst with TF Securities, said the sequence is most likely to be tier 3 and 4 cities that are facing great fiscal pressure, such as Heze, first. These will lead in easing restrictive policies, in the first half of 2019, before provincial capitals loosening their curbs.

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Heze in eastern China became the first city in more than two years on Wednesday last week to drop its home resale ban. Guangzhou followed a day later and eased its apartment sale ban. Then Zhuhai, a city bordering Macau, started allowing non-locals to buy homes in two outlying districts if they paid the local social security fund for one year. In other districts they have to pay five years’ worth to be eligible.