Four of China’s costliest cities scramble to knock a real estate bull run off its pace amid fear of risk and bubbling debt

Shanghai, the country’s commercial hub, kicked off the market-cooling policies last Friday with some of the most draconian policies to limit the amount of money homebuyers can borrow for buying real estate

That was followed within days by Shenzhen, Hangzhou and Guangzhou, some of the biggest and most affluent population centres besides Beijing

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Rice grows in a field as residential buildings stand in the background on the outskirts of Shanghai on Monday, April 17, 2017. Photo: Bloomberg

Published: 8:30am, 29 Jan 2021Updated: 12:19pm, 29 Jan 2021

Local authorities of four major Chinese cities have erected barriers over the past week to prevent an unprecedented flood of cheap money unleashed by the central bank from buoying prices in the 17.4 trillion yuan (US$2.7 trillion) housing market.

Shanghai, the country’s commercial hub, kicked off the market-cooling policies last Friday with some of the most draconian policies to limit the amount of money homebuyers can borrow for buying real estate. That was followed within days by housing authorities of Shenzhen, Hangzhou and Guangzhou, which together make up some of the biggest and most affluent population centres outside the Chinese capital.

The flurry of “measures in key cities is a very clear signal that the central government is pulling out all stops to cool the enthusiasm of buying homes, and prevent the market from overheating,” said Lung Siu-fung, a property analyst at CCB International Securities.

The value of China’s home sales defied the coronavirus pandemic and rose 8.7 per cent last year, with the average price soaring for 33 consecutive months, both records since the National Bureau of Statistics began releasing monthly data in 1991. Such lofty heights are raising concerns among policymakers during a period of economic vulnerability, amid a slower growth pace and wobbly job prospects during the coronavirus pandemic.

An agent shows potential buyers the layout of a new residential development at a real estate fair in Shanghai on 15 March, 2009. Photo: Corbis via Getty Images

China’s economy grew 2.3 per cent in 2020, a dramatic turnaround since the coronavirus pandemic ravaged the country in the early part of the year. The world’s second-largest economy is expected to be the only Group of 20 nation to expand this year and may surpass the United States in size five years earlier by 2028, according to a think tank.