To ease controls or not? Chinese cities see-saw on policy amid property market slump
- Local authorities need to strike a delicate balance between ensuring economic growth and toeing central government line to keep home prices under control
- Some cities that lifted curbs to prop up property markets have become test cases
A small city in central China has become the first city to flip-flop on its property price control policy in a day, underlining local governments’ growing dilemma of the need to prop up sluggish property markets, major economic growth drivers, without incurring the wrath of a central government determined to cool overheated home prices.
Hengyang, a 1.2 million people city in Hunan province, rescinded a directive to halt price curbs on Thursday night, just a day after it announced that it was easing measures.
Hengyang’s about-turn move contrasted with those of three other cities which eased controls in the past week, amid Beijing’s pro-growth policy for 2019 that emerged from a key national economic meeting. Easing measures in the three cities – Heze in north-eastern Shandong province, Guangzhou and Zhuhai in the south – were approved without any interference from the central or respective provincial governments, in line with the decision at the national meeting to allow local officials to decide on their own property market policies.
“There is always the delicate balance between local governments and Beijing: the former prioritise local property and broader economy as they relied on land sale and property-related taxes, while the latter is more concerned social stability,” said David Hong, Hong Kong head of research at property consultancy CRIC.
“For now, local governments are testing the waters.”