If It Looks Like a Duck, and Quacks Like A Duck, Is It a Policy Change?

Stories have been flying back and forth this week about whether or not Shanghai has loosened restrictions on residential real estate sales — essentially reversing two years of government policy and giving hope to the country’s beleaguered property market.

The latest word from the Shanghai city government is that there has been no change in policy.  Ok, so then why did the property stocks in Hong Kong and Shanghai rise to their highest level in three months following this alleged lack of change? Here are the facts as we know them.

According to a circular dated on Jan 31, 2011 from the Shanghai government, titled “Carrying Out the State Council’s Opinion to Further Control the Property Market”, only local Shanghai families were eligible to buy a second home in the city.

On Wednesday, an official from the Shanghai Municipal Housing Security and Administration Bureau was quoted in the Shanghai Securities News as saying, “Ever since the home purchase restrictions were implemented, long-term resident card holders have been allowed to buy a second residence, just like local Shanghai people.”

The government said later that there was no change in home- sales policy and that it will continue to implement home sales restrictions, according to a statement on its website.

Since anyone familiar with China’s hukou system is aware that the Chinese government has clear definition of who is a legal resident of city, then expanding the pool of people who can purchase home from legal residents to “long-term resident card holders” mean a big expansion in the number of people who can buy a home.

Just to clarify that city officials have changed their policy toward who can buy a home in Shanghai, let’s hear what agents brokering deals have been told by the municipal authorities (from the China Daily).

“Inspired by these media reports, we have contacted almost all the city’s housing trading centers, where we got confirmation that long-term resident card holders can buy a second home, a sharp contrast with several months ago when similar transactions were rejected,” said Zhu Pingping, an analyst from Shanghai Sinyi Realty Agency and Consulting Co Ltd.

What’s a bit hard to figure out is what type of tweaking in regulations are permissible at this point, and which are not.

As most observers know, the city of Wuhu recently had to recant its policy changes after they attracted international attention. However, there have been many other cities quietly revising their rules in the last 45 days to increase home sales and prop up prices.

• On February 17th, Shanghai revised the definition of “ordinary” houses, creating tax breaks for more home buyers. Beijing, Wuhan, and Tianjin have adopted similar measures.
• Hefei in Anhui province raised the maximum government subsidised mortgage amount from RMB 350,000 to 450,000, while Nanjing raised the maximum government subsidised mortgage from RMB 400,000 to 600,000. Dalian and Ningbo also adopted similar revisions.
• On January 22nd, Zhongshan raised the ceiling on tradeable residential properties from RMB 5,800 to RMB 6,590/sqm.

It seems that as long as city officials are able to keep a straight face while insisting that there has been no change in policy, and the changes that they make are oblique enough, then the central government will let the real estate ducks quack away.