Caixin
Mar 04, 2021 06:31 AM
ECONOMY

Hangzhou Joins Shanghai in Further Tightening Housing Restrictions

Hangzhou is one of China’s most expensive cities with average new house prices at more than 30,000 yuan ($4,600) a square meter.
Hangzhou is one of China’s most expensive cities with average new house prices at more than 30,000 yuan ($4,600) a square meter.

Hangzhou, one of the most expensive housing markets in China, joined Shanghai, Shenzhen and other megalopolises in taking further steps to crack down on real estate speculation amid surging housing prices.

Authorities in the eastern city of Hangzhou Wednesday issued rules requiring that auctions of court-seized properties be subject to restrictions as sales of other real estate are. Previously buyers of properties on the market had to meet certain criteria such as hukou residence permits, social security payments and marital status, but those restrictions didn’t apply to court-seized properties.

Such properties include foreclosures, real estate used as collateral by defaulted borrowers on online lending platforms or other private lending platforms, properties confiscated in criminal cases, and unclaimed properties.

Such properties are normally auctioned at prices lower than market levels. But as speculative investors and home buyers limited by restrictive policies rush into this segment, some court-seized properties in hot housing markets can fetch market-equivalent prices. Shanghai in January took actions to apply restrictive measures to court-seized properties.

Under the new rules, Hangzhou — with a population of 10.6 million — also bans personal business loans and consumer loans from being used for down payments on housing purchases or repayment of down-payment loans.

Recently multiple Chinese cities tightened regulation of housing loans. The Shanghai bureau of the China Banking and Insurance Regulatory Commission (CBIRC) in January issued a notice requiring banks to strictly examine the source of capital for down payments and borrowers’ solvency to prevent home buyers from using consumer loans and business loans for down payments. Several commercial banks in Guangzhou also raised mortgage rates.

Shanghai and Shenzhen unveiled policies designed to close a loophole long exploited by buyers using fake divorces to become eligible to purchase more properties or obtain mortgages. Shanghai will also levy a tax on sales of houses within five years of purchase, up from a previous two-year barrier. Hangzhou banned buyers of certain new homes from selling them within five years.

A new mechanism governing banks’ lending to the real estate sector also took effect in January, forcing some banks that breached ceilings on their real estate exposure to pare back loans to developers and home buyers.

Despite a series of control measures, China’s house-price growth accelerated in January as low inventory stoked fear of missing out among buyers.

New home prices in 70 major cities, excluding state-subsidized housing, rose 0.28% last month from December after climbing 0.12% in each of the previous two months, National Bureau of Statistics figures showed Tuesday. Values in the secondary market, which faces less government intervention, gained 0.37%, the fastest in 18 months.

CBIRC Chairman Guo Shuqing Tuesday warned of a real estate bubble. At a press conference on the state of the banking and insurance industries, Guo said many people are buying homes as speculative investments rather than as places to live in, which has the potential to disrupt the economy if prices should start to fall and homebuyers find themselves unable to repay their mortgages.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

Download our app to receive breaking news alerts and read the news on the go.

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code