Caixin
Dec 12, 2019 06:37 AM
ECONOMY

Relaxing Housing Controls Lasts One Day in Eastern China City

China has imposed strict controls on the property market nationwide since 2016. Photo: VCG
China has imposed strict controls on the property market nationwide since 2016. Photo: VCG

An eastern China city made a rare move to scrap a two-year old curb on home sales designed to combat market speculation. But the easing lasted just one day.

News circulated late Tuesday that Zhangjiagang, a manufacturing hub in Jiangsu province, lifted a policy in place since August 2018 to ban the resale of residential properties within two years of purchase. The news captured wide attention as it represented one of the boldest moves by a local government to loosen years of stringent control over the housing market.

A staff member at Zhangjiagang’s property transaction service center confirmed the news with Caixin in a phone call Wednesday morning. The staff said the resale restriction had been removed but it was still pending an official document.

However, hours later, the same center told Caixin that the policy change was suspended and had to “wait for authorities’ notice.”

The short-lived easing in Zhangjiagang reflects a conundrum facing local authorities in managing the housing market amid a broader slowing of economic growth. Most local authorities rolled out restrictive measures to curb home transactions since 2016 in response to the central government’s call to control the white-hot housing market and freewheeling home prices.

Despite growing downward pressure on the world’s second-largest economy, top policymakers have reiterated that the property market will not be used for short-term stimulus.

But Beijing has eased its tough stance on the housing market by allowing local authorities to fine-tune policies according to local conditions this year. A number of localities have moved to roll back some of the restrictive measures, but in a very cautious way.

In July, Kaifeng city in central China’s Henan province said it would cancel a three-year home resale restriction. But the city government revoked the policy one day later, citing lack of assessment of the policy’s impacts.

Earlier, Hengyang, another city in Henan, also withdrew a policy to scrap a cap on housing prices one day after the announcement, saying the change “caused market misinterpretation and hype.”

In September, the tropical island of Hainan said it had no plans to relax stringent controls on the local property market despite a slump in investment, home sales and tax revenue caused by policies aimed at reining in house prices.

With Beijing’s firm stance on controlling the housing market, local authorities are cautious in making policy adjustments, said Yan Yuejin, research head of Shanghai E-House Real Estate Research Institute. “No one wants to fire the first bullet,” Yan said.

Many local authorities have taken moderate moves to relax housing market restrictions, but few of them have fully removed controls, Yan said.

Since October, cities including Tianjin, Nanjing, Sanya and Foshan have issued policies to slightly relax home purchase restrictions, mainly targeting small groups of qualified buyers that fit local industrial development strategies.

As one of China’s richest county-level cities, Zhangjiagang has been a favored destination for property speculators. Housing sales in the city increased rapidly between 2014 and 2017 with sales surging nearly 50% in 2017 alone.

The policy curbing resales turned Zhangjiagang’s high-flying housing market around. In 2018, residential sales declined 8.6% from the previous year.

Local authorities said the city is striving to reduce its reliance on the property market. But official data showed that property investment still accounts for more than 85% of Zhangjiagang’s overall service industry-related investments.

Contact reporter Han Wei (weihan@caixin.com)

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