Shanghai raises bar for second homes

Tightened rules push up requirement to 70pc deposit as the city follows lead of Beijing and Shenzhen in stepping up efforts to rein in prices

PUBLISHED : Saturday, 09 November, 2013, 1:54am
UPDATED : Saturday, 09 November, 2013, 2:47am

Shanghai has become the third mainland city to raise the deposit requirement for second-home purchases to at least 70 per cent, a signal that efforts to rein in surging prices are increasing.

The mainland's richest city will also increase land supply for residential use by 30 per cent this year, aiming to cool housing price inflation in the medium term.

The measures, part of a seven-point policy announced by the city's housing bureau yesterday, were unveiled after Beijing and Shenzhen governments recently imposed similar requirements.

Property analysts said the moves came as no surprise, given the concerns that ordinary people were being priced out of the market.

"Home prices in first-tier cities have risen sharply in the past few months and it is expected city governments will impose some measures to cool the inflation," said Alan Chiang Sheung-lai, the head of residential property at consultancy DTZ Greater China.

Guangzhou and major second-tier cities such as Hangzhou and Nanjing were expected to also roll out price-control policies for property after the third plenary session of the Communist Party's Central Committee, which starts today, Chiang said.

Home prices in almost all the major cities continue to increase, despite cooling measures by the central government, according to the National Bureau of Statistics.

As a result of a long-running supply shortage, the prices of new homes in Shanghai in September rose 17 per cent from a year ago, against 15.4 per cent growth in August.

By DTZ's calculations, prices in the city rose more than 20 per cent last month, Chiang said.

Apart from loan restrictions, Chiang said city governments in future would focus on the supply of affordable and mass housing to ensure low and middle-income groups could afford to buy.

The 30 per cent increase in land supply for homes announced by Shanghai's housing bureau is aimed at helping the city meet an annual supply target of 1,000 hectares.

The deposit requirement for buyers of second homes in Shanghai had been at least 60 per cent, which was raised from 40 per cent in 2011.

Besides the move to increase the minimum deposit requirement to 70 per cent, the city government is tightening restrictions on home purchases by non-residents of Shanghai. For non-registered permanent residents to qualify as legitimate home buyers, they will need to provide tax records of at least two years within the past three years before purchase. Previously, at least one year of tax records within the past two years was required.

The city government did not say when the policy changes will become effective.

Property analysts are mostly not expecting additional tough measures by city governments aimed at curbing demand amid slowing economic growth, with some saying the market might be heading for a slowdown next year.

After almost 18 months of housing market gains, pent-up demand might have been largely absorbed, a Credit Suisse report said.

Supply was expected to increase next year due to this year's increase in land banks and new housing starts. The increased supply could meet weaker demand, the report said.