China’s latest quick property fix ‘skin deep’ – fails to tackle frenzy’s foundations, analysts say

China’s latest clampdown on housing market speculation is only skin-deep, leaving fundamental land and fiscal problems unresolved, analysts say.

While the newly imposed measures appear harsh by banning many potential buyers from buying property and squeezing bank supply for property deals, many rules are merely top-ups of existing restrictions to further depress demand, and fail to address the root problems underlying China’s property market frenzy. These include local government reliance on land deals for revenue, the absence of a property tax to discourage speculation, and a lack of investment alternatives to accommodate the flood of funds unleashed by the monetary authority.

While instructions from Chinese President Xi Jinping and Premier Li Keqiang to tame housing prices are instantly noted, local authorities still rely on selling land for income, an increasingly sought-after asset in large cities as supply dries up, so they have the least incentive to engineer a fall in property prices.

“The measures seem to target the symptoms of the problem instead of the real causes,” said Li Weisen, an economics professor at Fudan University. Li added that administrative measures to restrict home purchases could, at best, only achieve short-term results.