While there is no end to the speculation about whether the Chinese government will relax curbs on the housing market, and which way prices will go, it is becoming increasingly clear that the central government is determined to keep increases in housing prices at or below the rate of inflation in at least the near to medium term.
Evidence of this resolve on the part of the country’s central authorities was put on clear view on Friday when a number of new moves were announced to restrain the housing market on the same day that a major survey indicated that housing prices had gone up for the ninth straight month.
According to a report from the China Real Estate System (CREIS), a consultancy linked to Soufun Holdings, average home prices in February climbed 0.8 percent from January to 9,893 yuan ($1,600) per square metre.
The survey also showed that prices rose 2.5 percent in February from a year ago, more than doubling January’s 1.2 percent annual pace and marking the third straight month of year-on-year increase. (Please note that prices for any assets in China during the months of January and February may show unusual variances year to year due to the changing dates of the week-long Chinese New Year holiday).
This jump in prices met with a strong reaction from the government as it announced increased taxes on home transactions, higher mortgage interest rates, higher downpayment requirements.
The measures, which were announced in a statement on the website of China’s State Council on Friday entrusted The People’s Bank of China’s regional branches with implementing the measures. The statement also indicated that cities facing “relatively large” increases in housing prices must further tighten home-purchase limits.
What’s Included in the New Curbs
Details of the cooling measures outlined the statement include:
- Homeowners who sell their homes will be levied a tax of up to 20 percent of the profit they make on the transaction. Previously, the tax was usually levied as 1 to 2 percent of the sale price.
- In cities where home prices are deemed to be rising too quickly, local branches of the Peoples Bank of China can increase the down payment rate and mortgage loan interest rate for home buyers purchasing a second unit.
- Non-local families with one home or more, as well as non-local families without a certain amount of years of tax payment certificates or social security payment certificates, will be banned from buying homes in the cities in which they currently reside.
The statement also pointed towards stricter enforcement of existing curbs. In particular, it said that:
- Local governments will be held accountable for curbing soaring home prices, and required these authorities to make projections for housing prices in their communities.
- The central government will step up inspections of provincial-level governments’ property market control activities and those who fail to meet their targets will be penalized.
More Land to Be Made Available
The notice said China will work to increase land supplies for housing, and the total amount of such land nationwide in 2013 should be greater than, or equal to, the annual average over the last five years.