China Expands Tight Property Market Regulations

With a flurry of recent property market controls， Chinese authorities have demonstrated their will to keep a lid on housing prices， not just in large metropolises but also in smaller cities.

Over 40 cities unveiled property market regulations a total of 50 times in May， a monthly record， according to the latest statistics from Centaline Property.

While home prices in the countrys top-tier cities remain stable due to tight regulations， the market in smaller cities has shown signs of perking up.

In third-tier cities， month-on-month new home price growth accelerated by 0.2 percentage points in April. For second-hand homes it was 0.1 percentage point faster， official data showed.

“The housing price fl uctuations in third- and fourth-tier cities were the major reason behind the intensive regulations，” said Zhang Dawei， a Centaline Property analyst.

Until recent months， Chinas property curbs were focused on big cities， since authorities in smaller cities， mostly troubled by a large number of unsold houses， had been trying to encourage sales.

But now， with the market booming in lowertier cities， local governments have rolled out stricter restrictions on home purchases and sales， presale pricing and mortgage ratios， while supporting the development of rental housing. Some have adopted a lottery-like registration system for buying homes.

Local governments should stick to real estate market management goals and not loosen regulatory measures， the Ministry of Housing and Urban-Rural Development， the countrys top property regulator， said in a statement in May， citing notices of market speculation in some cities.

Chuancai Securities attributed the home price increase in lower-tier cities to government programs to transform shantytown areas. Residents living in these areas are usually given compensation for moving and thus have greater purchasing power for new homes.

Meanwhile， many local governments in third- and fourth-tier cities have adopted preferential policies， including housing subsidies， to attract talent.

“The policies to appeal to talent have increased demand for home purchases， resulting in a supply strain that has led to expectations for higher home prices，” said Zhang.

In May， of the 18 third- and fourth-tier cities monitored， the seven cities with relatively tougher regulations saw new home sales fall 2 percent by fl oor area from March， while the 11 cities with mild to no regulations saw sales surge 20 percent， according to a report by E-House China R&D; Institute.

Analysts believe authorities will continue their differentiated approach to property market regulations with more curbs in cities where housing prices have increased signifi cantly.

“The housing purchase lottery system could be adopted by more than 20 cities in the future，” Zhang said.

Wang Yeqiang， a researcher with the Chinese Academy of Social Sciences， predicted that the real estate market in third- and fourthtier cities would cool in the second half of the year as local governments gradually tighten regulations.