China wants its citizens to know that housing is for living, not for flipping. In the country’s latest regulatory move to dampen speculation in the residential market and rein in buoyant prices, eight second-tier cities including Chongqing have rolled out new housing controls, with most banning homeowners from reselling their properties within two to three years after purchase.
Shijiazhuang, the capital of northern China’s Hebei province, took the most aggressive stance – banning owners from reselling their homes within five years of purchase.
In what appears to be a coordinated move, similar home sales restrictions were announced on Friday in the southern China provincial capitals of Changsha in Hunan, Guiyang in Guizhou, Nanchang in Jiangxi and Nanning in Guangxi.
New restrictions came on line that same day in Wuhan, capital of Hubei province and Xi’an in Shaanxi province. The western China metropolis of Chongqing, which like Shanghai, Beijing and Tianjin is classified as a provincial-level entity, was also included in the housing transaction crackdown.
The latest round of government demand suppression measures come despite average home price growth having slid to less than half of a percentage point across the eight affected cities in August – the most recent month for which government statistical data is available.
Chongqing Rules Follow Central Government Directions
The new regulations in Chongqing took the form of a notice issued last Friday by the city’s Bureau of Land Resources and Housing, which cited the need to “earnestly implement the ‘housing is for living in, not speculation’ position, further curb housing speculation, and promote the smooth and healthy development of the real estate market in our city.”
China’s premier declared the central government’s determination to suppress real estate speculation and promote housing affordability at party meetings in March of this year, and the “housing is for living, not for speculation” motto has since become a catch-phrase for officials throughout the Chinese system.
The notice in the western Chinese mega-city applies only to the “main city areas” of the sprawling municipality – specifically the districts of Yuzhong, Jiangbei, Shapingba, Jiulongpo, Dadukou, Nan’an, Beibei, Yubei, Banan, and the Liangjiang New Area, which form the urban core of Chongqing. The rules, which cover “newly-purchased new commercial housing and second-hand housing,” impose a two-year freeze on reselling homes and specify the method for verifying the purchase date.
Measures Require Holding Your Homes
In Chongqing, Nanning and Nanchang, homeowners are now required to wait for two years before they can resell their dwellings – regardless of whether the homes are old or newly built.
In Changsha, property owners must wait for three years before they can flip their homes, and in Xi’an, homeowners must get approval from the authorities in order to resell. In Wuhan, property developers were instructed not to discriminate against home buyers who plan to take out mortgages rather than pay in full.
Some of the cities have also limited the number of homes that can be purchased to one per household over a two- or three-year period, among other restrictions.
Authorities Target Provincial Cities after First-Tier Freeze
After home prices surged by as much as 76 percent in first-tier cities from the start of 2015 through the end of 2016, the Chinese government launched a series of measures to dampen housing demand. Starting this past March, dozens of cities have imposed stricter rules on homebuyers, ranging from higher down-payment requirements to de facto ceilings on the price tags of new homes.
The new controls have succeeded in stifling home price growth in China’s first-tier cities, where some of the toughest measures have been imposed. However, this has driven speculative demand into many lower-tier municipalities, where costs have continued to climb in the absence of strict controls.
The eight cities included in the new clampdown saw prices of newly constructed residences grow by an average of 0.4 percent from July to August, even as prices remained frozen quarter-on-quarter in Shanghai and Beijing, and dipped by 0.4 percent in Shenzhen and by 0.7 percent in Guangzhou, respectively, according to data from the National Bureau of Statistics.
Among the eight cities, prices in Nanchang jumped the most with an increase of 0.9 percent month-on-month, while prices climbed by 0.7 percent in Guiyang. Only Wuhan saw a decline, easing by 0.2 percent.
Prices in the same eight cities rose by an average of 11.2 percent year-on-year in August, and by 20.3 percent since 2015. According to weighted calculations by Reuters, new home prices in third-tier cities rose by 0.4 percent in August, which was faster than average but slower than the 0.6 gain percent in July.