Home sales hit a new high in Hangzhou, China’s G20 host city

Cash-rich Chinese investors have been rushing to the housing market in Hangzhou, anticipating strong growth in the city after it hosted the country’s first G20 summit earlier this month.

Now Hangzhou, a two-hour drive from Shanghai, has become the latest city to roll out home purchase restrictions in a bid to cool the market. It announced a new rule to bar non-locals from buying a second house in its down town area, effective from September 19.

The provincial capital of Zhejiang province in eastern China saw a record 154,000 new homes sold in the first eight months of this year, already surpassing the number sold in the whole of 2015, according to E-House China R&D Institute.

On Sunday, the last day before the new rule came into effect, 5,105 homes were bought in Hangzhou, the most transactions ever in a single day for the city.

“G20 is a big trigger to the city’s housing market,” said Clement Luk, real estate agency Centaline Property’s chief executive for east China.

Luk said the city’s urban infrastructure has been greatly improved because of the preparation for G20, while the successful hosting of such a prestigious global event has boosted people’s confidence in the city’s future.

The city, which was still struggling with an oversupply of homes a year ago, has rebounded strongly in the past few months amid a nationwide property boom.

New home prices in Hangzhou jumped 3.7 per cent in August, compared to 2.6 per cent in July, to 18,340 yuan per square metre, the sixth highest among mainland cities, China Index Academy data shows.

John So, a property market analyst at China Merchants Securities, said the authorities in Hangzhou have been reducing land supply after it peaked in 2013, leading to a better supply-demand balance.

“The inventory now is less than six months of sales,” So said, compared with 12 months at the beginning of this year.

Investors from outside Hangzhou have become a major force among home buyers. More than 30 per cent of the city’s new homes sold to non-locals in August, according to official data.

Wang Meiqun, who lives in Shanghai and originally comes from Taizhou, a small city in Zhejiang province, bought a villa in Hangzhou last month.

Wang said she chose Hangzhou instead of Shanghai because buying a house in the former will entitle her to permanent residency - a benefit not conveyed by property ownership in Shanghai.

“Hangzhou is a beautiful city and is building up to be the technology hub in China as it is the home town of Alibaba. We are bullish about Hangzhou,” she said.

So said the newly tightened housing policies are likely to slow the growth of home prices in Hangzhou, but the easing of monetary conditions on the mainland will ensure prices don’t decline.

Capital has been pouring into real estate as investors search desperately for returns, Luk said.

“Not just in Hangzhou, we have seen many second tier cities, even some third tier cities’ housing markets heating up because of credit easing,” he said.

Prices will continue to rise unless the central bank tightens lending, Luk added.