House and Home

To curb speculation in the housing market aroused by the recent decision taken by the Central Government to build Hainan Island into a free trade port, the prov- ince announced an island-wide quota policy on housing purchases on the night of April 22. According to the rules, non-Hainan resi- dents who want to buy houses in areas now covered by the purchase restrictions have to provide the tax or social security records of at least one family member in Hainan covering a period of 24 months or longer. To buy houses in Haikou, Sanya and Qionghai, which are already subject to purchase restrictions, buyers need to provide tax or social security payment records of 60 months or longer from at least one family member.

In the four central ecological areas, namely Wuzhishan, Baoting, Qiongzhong and Baisha, houses are only allowed to be sold to local residents.

A family whose household registration transferred to Hainan as of April 22 when the new rules were issued is limited to the purchase of one home on the island and must provide the tax or social security payment records of at least one family member in Hainan for 24 months or longer.

Home loans have also been tightened. According to the new rules, non-Hainan resi- dents who want to buy houses or commercial property must pay at least 70 percent of the total price as a down payment.

This was the second document issued on control over the property market in Hainan in April. On April 16, the housing and urban-rural development department of the province also issued a guideline featuring six major measures on maintaining the stability of the real estate market.

Short­term control

At the outset of this year, Lanzhou, the capital city of Gansu Province, relaxed home purchas- ing limits, with cities such as Nanjing, capital of Jiangsu Province, and Hefei, capital of Anhui Province, following soon after.

Many took this to indicate that the real estate market would soon resume fast growth. However, since late March, more than 10 cities have issued policies on the control of home purchases such as Dalian, Kunming, Hangzhou, Changsha, Wuhan, Shenzhen, Xi’an, Guangzhou, Chengdu and Nanjing.

“This round of control over the property market is to continue and intensify previous policies,” said Bai Yanjun, chief analyst of the China Index Academy. He said that some cities and counties without a home purchasing limit are now restricting purchases, such as Dalian and Funan County, while some areas with ex- isting home purchasing limits are intensifying these restrictions, such as Hainan Province and the cities of Shenzhen, Hangzhou and Xi’an. All these policies aim to address speculative activi- ties in the real estate market.

Zhang Bo, chief analyst of 58 Anjuke Property Research Institute, said that the new policies issued by local governments since March have three main features.

“Key areas are tightening short-term control, such as Dalian and Hainan, while local governments are paying more attention to regulating property transaction activities, as in Shenzhen and Hangzhou, in order to block under-the-table deals in property transactions. More targeted measures are also being seen in many cities throughout the country,” Zhang said.

Curbing price hikes

March is an important period to observe prop- erty prices for the whole year, and is also a key window for the government to issue measures to control the real estate market. Nonetheless, it is rare for so many local governments to intensify control over the real estate market as was seen this year.

“These new measures indicate that control over the property market will be further tight- ened in the second quarter, and expectations on relaxed control will be eliminated. This also shows that the potential market is still overheat- ed and must be cooled down,” said Yan Yuejin,research director of the E-House Real Estate Research Institute.

Zhang did not consider the intensive new measures issued by local governments unex- pected. Most of the new measures are targeted in regions where housing prices grow too rapid- ly, and they aim to better meet the purchasing demands of families without housing.

“This is more in line with the orientation of real estate control and will ensure the sound development of the market,” Zhang said. Although Beijing and other first-tier cities continue to see sluggish growth, expansion is resuming in property markets in second and third-tier cities across China.

According to figures from the National Bureau of Statistics, the price of new commer- cial residential housing in fi rst-tier cities dropped by 0.1 percent year on year in February, while growth rates for the prices of newly built and second-hand residential housing in second- and third-tier cities were 0.4 of a percentage point and 0.1 of a percentage point higher than the previous month.

Long­term mechanisms

Government attempts to bring stability to the property market are in accordance with the principle that “houses are for living in, not for speculating with.”

“The way to realize this is to more quickly put in place a housing system that ensures sup- ply through multiple sources, provides housing support through multiple channels and encour- ages both the purchase and renting of houses, and then to establish long-term mechanism for effective real estate control,” said Cui Ji, General Manager of the E-House Real Estate Research Institute’s Comprehensive Study Center. According to Cui, restrictions on purchas- ing, prices and loans in the housing sector are merely short-term control measures, while a long-term mechanism should include policies on finance, land supply, taxation, investment and legislation that will promote the sound de- velopment of the real estate industry.

Gu Yunchang, Chairman of the National Property Commerce Chamber, thinks that the problems in the property sector are not merely the problems of one single industry, but involve many other factors. He also believes that a long-term mechanism is needed, in par ticular a system involving land supply, taxation and fi nance.

Independent economist Ma Guangyuan said that local governments no longer focus on the policy of “reducing unsold homes” as they did in the previous two years, and they are instead paying more attention to institutional reform and long-term policies regarding the real estate industry.