Nanning Relaxes Property Rules in Bid to Boost Housing Market

Tweaking residency requirements is emerging as an accepted path to skirt China’s policy restrictions on home sales as Nanning, the capital city of China’s Guangxi province, last week announced new guidelines on who qualifies to buy a home as a city resident.

According to an article published by the official Chinese news agency, Xinhua, the local housing bureau published a document giving residents of an economic zone near Nanning the right to buy property in the city.

Loosening Hukou Requirements to Create More Buyers

Reports of the move by Nanning to widen the group of buyers qualified for the more favorable local resident terms for home purchases follows soon after the city of Wuxi in Jiangsu province began relaxing the requirements for securing a hukou, the all important household registration document in China, for non-residents who buy a home in the city.

The actions by Nanning and Wuxi are both seen as ways to create more housing demand as China’s housing market has seen prices soften and home sales slow down this year.

An article in Global Times cited Wu Ning, a Nanning-based research manager with real estate data firm CRIC, as indicating that new home sales in the city fell by 21 percent quarter-on-quarter in the first three months of 2014, although there was still 18 percent year-on-year growth. A survey released last week by a branch of E-House China showed home prices nationwide declining on a month-to-month basis for the first time since 2012.

Under the current policy restrictions in most cities, local families who already own one home can purchase an additional unit. Non-local residents are generally restricted to owning only one home. Most cities also apply stricter mortgage policies to non-residents.

Playing Government Policy Bingo

While earlier attempts by local administrations to roll back or work around the central government-dictated rules on housing sales have all been rescinded shortly after their debut, the Wuxi and Nanning authorities may have cleverly aligned themselves with more recent initiatives from the policy-makers in Beijing.

One of the key plans of the Xi administration is bringing 85 million rural Chinese into range of city services and opportunities by 2020. Reform of the hukou (household registration) system, which ties individuals to their household and community, is an important element of this plan. On March 16th this year a major new plan was introduced aimed at bringing the country to that urbanisation goal.

So by aligning their attempts at skirting housing policy with the new plans for moving rural residents into the city, its possible that Wuxi and Nanning may be creating a model mechanism for other Chinese communities to add more potential buyers to their housing markets.