Beijing has big plans for Tongzhou real estate
Already home to China’s most stringent home purchase rules, Beijing last week announced fresh curbs on the property market in the city’s Tongzhou District, an area slated to become an important political and residential hub where a bulk the city’s government is scheduled to move within the next five years.
The new policy follows measures introduced last summer to cool the property market in the satellite district. The rules restrict home purchase to first-time buyers who have a Beijing hukou, a form of local residency permit that is required for school enrollment and other social benefits, or first-time buyers who lack a Beijing hukou but have contributed to social security or income tax in the city for at least three years in a row.
City’s Government District Sees Sales Jump 1432 Percent
Tongzhou, roughly equivalent in area to four Bostons in the US, is 20 kilometers east of Beijing and homes there are less expensive than in the capital. Still, housing prices in the area have increased seven-fold in the last decade, according to Chinese press citing official data, partly driven up by its proximity to downtown Beijing as well as by the long-speculated decision to move the city’s government to the area.
Shortly after the announcement of the purchase restrictions last summer, Beijing confirmed that it would move the municipal government to Tongzhou by the end of 2017, part of a plan to ease population pressure in an already crowded city. That move has fueled a wave of investment interest Tongzhou property despite the purchase restriction. Data from 5j5j.com, a Chinese real estate agent, showed that home transactions in Tongzhou grew by of 1432 percent in March compared to the same period last year.
Restricting Sales of SOHO Properties
Now, in what one Chinese newspaper said was the “most strict purchase restriction” in history, the new rules seek to rein in investment in units of commercial-titled buildings which are being sold as residences, or “business-style apartments” as they have been dubbed in the local press.
This loosely regulated small-0ffice/home office or SOHO housing market was previously exempt from restrictions on sales of residential property. Such apartments in buildings licensed as offices have gained in popularity in recent years, often because their maximum 50-year commercial titles have made them more affordable than residential property that comes with 70-year usage rights.
Under the new policy, however, such apartments could only be sold to Beijing hukou holders who do not already own a home, single people, or Beijing hukou holders who only have one home under their name. First-time homebuyers eyeing such apartments, would be required to have already contributed to social security funds for at least five years.
Strata Office Sales Expected to Suffer
“Business-style apartments and those properties developed for commercial and business purposes as well as those that have been redesigned into residential apartments equipped with independent bathrooms and kitchens have potential for speculative investment,” Xinhua, China’s official state news agency, said last Thursday when the new curbs were announced.
The new rules stipulate that only companies or social groups are eligible to buy offices and properties used for commercial purposes in Tongzhou. Zhang Dawei, a property analyst, told Securities Times that business-style apartments only account for about 5 percent of the housing market, but he added that the rule will hurt 60-80 percent of strata office sales now that only companies and social groups are allowed to purchase such property in the district.
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