On Wednesday, the Shenzhen Housing and Construction Bureau announced a set of new home purchase restrictions designed to cool down what has become China’s hottest property market as home sales in the country rebound in the wake of the COVID-19 lockdown.
According to the government announcement, residents are now only allowed to purchase a home after holding hukou (local household registration permit) for at least three years. Previously, newly-minted residents were eligible to purchase a home immediately after winning the prized document.
Potential homebuyers are also required to show proof of having paid their income tax or social security in the city for 36 consecutive months. And in another step aimed at reducing the pool of eligible buyers, single residents can now own no more than one home while families are restricted to two.
Shenzhen Outpaces Shanghai, Beijing
Shenzhen’s residential market has more than recovered from the impact of the pandemic. About 44,000 existing homes changed hands in the first half of 2020, marking a 41 percent increase in transaction volume compared to the same period a year earlier, according to real estate intelligence site Leyoujia.
This increase in buyer demand has helped make the tech hub across the border from Hong Kong the costliest market in mainland China.
In the past year to May, Shenzhen’s house prices have risen by an average of 12 percent, surpassing the 4.9 percent average annual growth in prices across 70 major Chinese cities tracked by the National Bureau of Statistics over the same period.
In June, existing homes in the city, which is home to telecom firm Huawei and Internet giant Tencent, sold for an average RMB 65,083 (US$9,310) per square meter– 3 percent higher than homes in Beijing — according to data compiled by property agency Lianjia.
Second-hand homes are one of the hottest segments in the city’s residential market, with property agency Anjuke estimating their average prices at RMB 55,863 per square meter — 8 percent higher than second-hand homes in Shanghai.
Cooling Down the Market
Residential regulations are not new to Shenzhen. Since 2010, the local government has been attempting to tamp down prices and discourage speculation by limiting home ownership to legal residents. Tax and social security requirements have also been strengthened for non-hukou holders through 2016.
In 2018, the Shenzhen government prohibited companies from buying residential units and established a three-year holding period for resale of homes.
Prior to the recent announcement, residents of Shenzhen were allowed to purchase homes as soon as they received the hukou permit allowing them to legally reside in the city.
Adding to Supply
According to Wednesday’s announcement, the Shenzhen government is planning to add more than three square kilometres of residential land to the city’s development pipeline — more than double the volume provided the previous year.
City authorities expect to developers to add 12 million square metres of housing to the city’s private home market this year — nearly double the amount completed in 2019.
The local government is also planning to increase public housing by opening up no less than 80,000 units this year, taking the city closer to its goal of 400,000 public housing units by the end of this year. By the end of last year, there were 310,000 public housing units.