54% Jump in Suzhou Home Prices Triggers Govt Clampdown

In a sign of real estate policy tightening outside of China’s first-tier cities, Suzhou’s city government has responded to rocketing prices in its land and property markets by calling off land auctions and preparing a series of sales restrictions to limit property speculation, according to recent reports in the local media.

The Suzhou government took action to cool down the housing market after prices in the city of 5.5 million people just over 100 kilometres (68 miles) from Shanghai rose by more than half last month. The increased interest in real estate in the second-tier city in Jiangsu province comes after Shanghai authorities squelched a boom that had driven a 184 percent increase in housing transactions in the megacity over the last year.

Land Auction Suspended, Stricter Mortgage Criteria Expected

Suzhou’s city government has postponed the scheduled May 20th auction of five land plots in the city to a later date as a means to ‘optimize the supply of land in the city,’ real estate website guandian.cn reported today.

City authorities will also tighten mortgage qualification criteria from May 24th, to quell speculative investment from non-residents. Buyers hoping to borrow money for purchasing a home in Suzhou will first need to prove at least one years’ social security contributions in the city, as well as a minimum of two years’ local income tax receipts, in addition to proof that they have lived in the city for at least a year.

Suzhou Property Prices Grow 54% in One Year

The government clampdown follows reports that the average price of homes sold in Suzhou increased by 5.4 percent in April compared to March, and that these figures showed an increase of 54.1 percent compared to the same month in 2015. Homes in the city now average RMB 17,553 ($2687) per square metre, according to data from real estate website Soufun.com.

The increase in home prices has also renewed interest among developers in buying land in Suzhou. Mainland developer Zhuhai Huafa Group recently won out after 134 rounds of bidding to purchase a piece of Suzhou land for 133 percent over the auction starting price, according to a report in the South China Morning Post.

Suzhou Policy Changes Follow Earlier Moves in Shanghai and Shenzhen

While Suzhou’s expected real estate restrictions would be something new for a second-tier mainland city, the policy measures would appear to be patterned after recent rules instituted in Shanghai and Shenzhen.

In late-March, the Shenzhen and Shanghai city governments introduced their own policies to dampen sales, following a boom that saw Shenzhen home prices rise more than 50 percent in one year.

While Suzhou appears to be the first second-tier city to impose new home purchase restrictions this year, it may be just the vanguard of a broader movement, as China’s housing rebound overflows from restricted markets in Shanghai, Shenzhen and Beijing.

Hangzhou, which is less than one hour from Shanghai by high speed train saw home sales jump by 115 percent in the first quarter of this year, compared to the same period in 2015.Official data shows new commercial home sales in Hangzhou surged 115 per cent year-on-year in terms of floor area in the first quarter of 2016.

Nanjing, which like Hangzhou and Suzhou is a major centre in the Yangtze River Delta, saw home prices up by 21.3 percent in April compared to the same month last year, according to the National Bureau of Statistics.