After some apparent second thoughts, the Chinese city of Hohhot has officially lifted some of the key restraints on home sales, as the Inner Mongolian capital struggles with a severe oversupply of housing.
According to a statement on Hohhot’s local government website, homebuyers will no longer be required to submit information on any existing home ownership. This change in the local home sales rules removes one of the measures that had earlier proved most effective in tamping down demand for new homes – the limiting of purchases by local residents to one additional home, beyond their current holdings.
The statement on Hohhot’s website was dated Thursday, and substantially replaced a similar statement posted earlier in the week which had disappeared by Wednesday.
Major Change in Chinese Home Sales Policy
Hohhot’s move appears to be the most significant policy change yet by a local government in China, as many communities struggle with a slowing real estate market and officials fret over a related slowdown in economic growth and revenue from land sales.
Prior to the latest policy change by the Inner Mongolian capital, several other Chinese cities, including Nanning, Wuhu and Wuxi had adjusted residency requirements to increase the pool of eligible local buyers, without officially removing the limits on sales per household. Under the rules instituted in most cities non-residents face greater hurdles to purchasing a property.
Other cities suffering from a housing glut, including Shenyang and Hangzhou are said to have relaxed enforcement of existing rules without officially announcing a policy change.
Hohhot’s New Rules May Not Revive Housing Market
The home ownership rules in Hohhot, which were originally implemented as part of a central government push to cool down an overheated housing market, had been in place since 2011. According to estimates by real estate consultancy Centaline (China) the city’s unsold inventory of 120,000 units would take more than 10 years to clear at the current rate of sales.
How effective the policy change will be in reviving demand in the city of 2.8 million people remains to be seen. Informal changes in rule enforcement have done little to stem the housing sales slide in Shenyang or Hangzhou, with Hangzhou recording the biggest month to month drop in housing sales last month according to at least one survey.