Cities in China tighten home-buying rules

Bloomberg

Two cities in China’s eastern Jiangsu province unveiled a package of measures designed to stem a surge in property prices, as more local policy makers are gearing up to cool overheating home markets.
Nanjing, Jiangsu’s provincial capital, and Suzhou, a regional manufacturing base that’s a 30-minute train ride from Shanghai, will raise down-payment requirements for some buyers of second homes to 50 percent, the two city governments said in statements on official microblogs. Down-payment thresholds were 45 percent in Nanjing and 40 percent in Suzhou. Rules for both cities will take effect from Aug. 12.
Tightening measures have spread from larger hubs such as Shanghai and Shenzhen as local officials tackle overheating that followed stimulus rolled out from November 2014. The cities of Xiamen, in Fujian province, and Hefei, in Anhui, have already acted. China’s top leaders last month pledged to curb “asset bubbles” in a Politburo meeting led by President Xi Jinping, which Goldman Sachs Group Inc. economists view as a more cautious consideration by the authorities on the property market.

CURBING SPECULATION
The curbs imposed in Nanjing and Suzhou, which have had among the biggest increases in home prices this year, come as an “explicit signal” that the previously favored property policies will potentially change, said Chen Shen, a Shanghai-based property analyst at China Securities Co. More cities could follow with cooling measures, Chen added.
As part of efforts to curb purchases by outsiders, Suzhou will limit the eligibility for second homes to buyers who have paid income taxes and social insurance for at least a year since August 2014. Home prices in Suzhou soared 64 percent in June from a year earlier, according to data compiled by China Real Estate Information Corp.
“Suzhou is the first second-tier city to restart the limit on home ownership,” said Zhang Hongwei, a research director at Shanghai-based Tospur Real Estate Consulting Co. “The local government wants to curb investors and speculators.”
Before this year, all but five of the 46 cities that imposed limits on home ownership since 2010 removed or relaxed such restrictions amid a property downturn that has dented local revenues from land sales. New-home prices in Nanjing jumped almost 30 percent in June from a year earlier, the latest official data show.
Meanwhile, Ma Jun, chief economist of the People’s Bank of China’s research bureau, said China’s slowing growth in money supply hasn’t affected the economy and the nation’s fundamentals support a stable foreign-exchange rate.
The country’s stabilizing hoard of foreign reserves, which were little changed at $3.201 trillion in July from the previous month, signal the exchange rate is near equilibrium, Ma Jun wrote in a note Saturday. He added China’s corporate debt was high by international standards and that it should reduce the leverage by cleaning up “zombie” companies and implementing debt-to-equity swaps.