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Source: China Daily China Daily

Chinese cities expected to ease property regulations

Published: 02 Jul 2014 23:59:38 PST

GUANGZHOU - At least six cities in China have loosened controls over the property market and more are expected to do the same as local governments are worried that sluggish home sales may drag on the economy.

Zhang Dawei, chief analyst with Centaline, a leading property agent in China, told Xinhua on Sunday that policies once aimed at curbing excessive growth of the property market appear to be loosening across China.

"More than 30 cities nationwide are expected to loosen controls on the property market as the market will continue cooling in the near future," said Zhang.

China's property market has been booming since 2003, and the government has been trying to rein things in by rolling out measures such as home purchase restrictions. After a decade of rapid growth, the overheated market has started to cool in 2014.

According to the National Bureau of Statistics, the growth of new housing starts, a leading indicator of property investment, fell 27.2 percent year on year in the first quarter, while sales in residential areas contracted by 5.7 percent.

The slowdown has already taken a toll on local governments' fiscal revenues. Statistics released by the Ministry of Finance on Monday showed taxes related to the property market were contributing less to the growth of local fiscal revenue, with business tax for real estate down by 4.2 percent in April.

"In one to two years, this will have a tremendous negative effect on real estate investment and local governments' infrastructure investment, which relies heavily on revenue from the real estate sector," said Chen Wenzhao, an analyst with China Merchants Securities.

"The outlook for a housing price drop will affect people's willingness to buy properties, pressing economic growth to slow down," he added.

The market slowdown has prompted local governments into action. Nanning, the capital city of Guangxi Zhuang Autonomous Region, became the first city to ease home purchase restrictions by allowing more non-residents to buy homes starting May.

Nanning was later joined in efforts to loosen control on the market by cities including Wuxi, Ningbo and Tongling, and many more were reported to be considering similar relaxations.

The latest came on Thursday, when media reported that Tianjin was considering allowing residents to buy three properties, one more than it currently allows. The government did not confirm the report.

In south China, an industry insider claimed in an online post last Sunday that Nansha District in the south China metropolis of Guangzhou will lift property purchase restrictions for Hong Kong and Macao residents.

However, the housing administrative bureau of Guangzhou told Xinhua that it had not received applications from the district.

The denial came days after Gaoming District in Foshan, a neighboring city, was pressured to abandon plans to relax restrictions on buying homes, saying the policy is "suspended due to objective reasons."

Most local governments remain extremely cautious, as the central government has not yet made clear where it stands on local authorities' moves to loosen market control, said Hu Gang, a professor with the Administrative Management Department of Jinan University in Guangzhou.

"In this year's government report, the central government only said it will regulate housing differently in different cities in light of local conditions. Although that leaves more room for local governments, it did not draw a line of what can be done and what cannot be done," explained Hu.

He added that many cities are still exploring possible actions within the red line, and are testing the reactions of the public and the central government.

Chen Sheng, executive director of China Real Estate Data Academy in Shanghai, believes that easing controls on the market will be a common practice among local governments.

"Especially in markets where the supply is more than demand, any administrative interference should be withdrawn," said Chen. "Otherwise, systemic risks will arise."

According to Zhang Dawei, pressure to ease grips on the market will mount for cities that have overly large inventories while sales of residential areas have been dropping too fast in the first quarter.

"Cities where the housing price stops rising might also put forward policies to save the market. I think local governments will take all possible measures to adjust their regulations on the market," Zhang said.

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