Guangdong’s Foshan Latest City to Set Limits on Buying Pre-Owned Homes

(Beijing) — A city in China’s richest province Guangdong is beefing up efforts to tame the sizzling prices of pre-owned homes in urban areas buoyed by spillover demand from the provincial capital.

In Foshan, a major manufacturing hub in Guangdong, local buyers are now allowed to purchase up to only two homes, whether they are new or pre-owned properties, the city’s government said late Wednesday. Previous policies set a limit only on the purchase of new homes, but not pre-owned homes.

Under the new rule, non-local buyers who can prove that they have paid taxes or contributed to the social security system over the past year are now allowed to buy only one pre-owned home. Non-local buyers who cannot offer such proof are banned from the market.

Escalating housing prices remain a policy priority in China. Compared with new homes, pre-owned homes are usually less of a policy target for the government when it attempts to curb property prices. However, if unmet demand under the curb spills over into pre-owned homes, and sometimes even to neighboring cities, the government steps in to rein in the spillover effect.

In Foshan, sales of pre-owned homes exceeded those of new properties for the first time in four years in March, according to Hong Kong-based property consultant Centaline Property. Foshan city government said the overheating has been largely driven by demand originating from the provincial capital Guangzhou.

Huang Zhixing, deputy director of Centaline’s research team in Foshan, told Caixin that the number of buyers from Guangzhou have increased significantly over recent months.

After several rounds of policy tightening in a bid to cool rising housing sales in Foshan, sales of new homes there fell by nearly 50% in April from March, with average transaction prices per square meter remaining largely flat.

Contact reporter Pan Che (chepan@caixin.com)