Shanghai and Tianjin Hike Down Payments as Wang Jianlin Warns on Housing Bubble

Despite the attempts of China’s official statistics keepers to demonstrate the stability of the country’s housing market, local governments continue to tighten home buying measures as prices trend upward.

This week saw Shanghai and Tianjin strengthen recently implemented cooling measures as home price growth in both cities slowed but not stopped. The moves by the two local governments followed analysis earlier this month from the China Index Academy showed prices in Shanghai rose 1.09 percent in October compared to September, and are up 31.1 percent during the past 12 months.

Those figures were enough for the local government to increase down payments for first-time buyers to 35 percent, up from the previous mark of 30 percent. Additionally, authorities redefined first-time homebuyer to exclude anyone who had previously taken out a mortgage, even if the property had been paid off and sold.

Meanwhile in the port city of Tianjin, home prices increased 1.55 percent last month and 25.3 percent in the past 12 months prompting the government there to take more action. The northern Chinese metropolis increased down payment requirements for first-time homebuyers to 30 percent, up from 20 percent, while also raising down payment minimums for those with unpaid mortgages who plan to buy a second home.

Wang Jianlin And Harvard Differ on China Market Bubble

For the second time in three months, Wanda Chairman and China’s richest man, Wang Jianlin spoke of a bubble in the country, but was less concerned about its impact when speaking at a Forbes conference in Jakarta recently.

“Yes, there’s a bubble in China,” Wang was quoted as saying. “Particularly in the last few years it’s quite big, but (the housing sector) will not collapse.”

In an interview with CNN in September, the mall tycoon was less optimistic claiming he did not see a solution to the housing bubble in China as government measures had proven to be ineffective. He also dubbed China’s housing market “the biggest bubble in history.”

However, one US scholar from Harvard wasn’t as concerned as Wang, noting that the housing bubble might actually be sustainable. Edward Glaeser opined in a working paper that as long as the level of new supply was radically curtailed, a downturn could be averted.

Moody’s Predicts Stable 2017 For China’s Housing Market

Financial services outfit Moody’s looked into its crystal ball and foresaw a stable 2017 for China’s housing market as a small jump in selling prices is likely to be offset by a decline in transactions.

“Specifically, sales volumes will decline by around 5 to 10 percent in 2017,” Kaven Tsang, vice president and senior credit officer at Moody’s, told the South China Morning Post.

And while a number of cooling measures are in place now and continue to be beefed up by governments looking to stifle home prices, they may not be around for long. David Hong, head of research at China Real Estate Information, believes a new loosening cycle could happen as soon as the second half of 2017 if the housing market cools in the first half.