Chinese cities fight property speculation with home purchase reforms

Local governments in six Chinese cities tightened rules for home purchases over the past three days in a bid to damp resurgent demand and rein in excessive speculation.

Authorities in the six metropolitan areas introduced measures ranging from raising down-payment requirements for both first and second homes to ruling some potential buyers ineligible.

Sichuan’s provincial capital Chengdu and Henan’s provincial capital Zhengzhou yesterday banned people from buying a third property in some areas. Wuxi, a southern manufacturing base close to Shanghai, raised down-payment requirements for second homes to a minimum of 40 per cent of the property’s value from 30 per cent previously.

Capital city Beijing on Friday increased down payments for first-time purchasers to a minimum of 35 per cent of the selling price, the highest level among Chinese biggest cities. Adjacent Tianjin banned non-locals from buying second properties, while southern Suzhou said it would warn developers if prices were “notably” higher than costs plus a reasonable profit.

Home prices in the world’s most populous nation rose the most in six years in August, defying new policies to curb excessive speculation in big cities and government warnings about asset bubbles. While gains have been most pronounced in big cities such as Shenzhen, where home prices are up about 60 per cent in the past year, smaller centres such as Xiamen have also seen runaway growth, with prices soaring more than 38 per cent.

“There will not be a holistic plan to address the property market,” said Iris Pang, a senior economist for Greater China at Natixis in Hong Kong.

“Local governments are the ones who will work out their own measures.”

Investment in the property sector may retreat in the first half of next year as the new curbs take effect, said Wen Bin, a Beijing-based researcher at China Minsheng Banking.

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