China’s home prices in February grew at a flat pace, jumping 12.4 percent from a year ago but just 0.4 on the previous month according to the National Bureau of Statistics; despite these new figures, 18 cities throughout China have now enacted measures to dampen demand for homes.
The city of Beijing has been instituting property cooling measures since October of last year, but the capital’s new moves on Friday put in place the harshest yet seen on the mainland, including increasing the down payment requirements for second home purchases 10 percent to as high as 80 percent in some cases. The new regulations also changed the meaning of the word “second-home buyers,” to include anyone who has taken out a mortgage, even if it’s not in the capital city.
Soon after Beijing filed its new restrictions the northern Chinese cities of Shijiazhuang, Zhengzhou, and Baoding took their own steps to cool their own property markets, while Changsha in Hunan province and Guangzhou also clamped down on enthusiastic would-be homebuyers.
Speculators Fall Out of Fashion with the Party
The new round of local government measures came soon after China’s senior leadership underlined its determination to stamp out real estate speculation at top level government meetings in Beijing.
Premier Li Keqiang insisted “Housing is for housing, not speculation” at the National People’s Congress earlier this month, with that line being echoed by the Minister of Housing and Urban and Rural Development.
Even with several rounds of cooling measures having been rolled out in China’s first-tier cities and many of its most developed second-tier communities, out of 70 cities included in the National Bureau of Statistics’ February survey, a total of 56 cities showed growth in average home prices compared to the previous month. That number of markets on the rise was up from 45 out of 70 in January, and the Bureau’s study focuses primarily on first and second-tier cities.
Investors Seek New Markets for Bottled Up Capital
One explanation for investors driving up the price of housing in more mainland markets is the lack of attractive alternatives for capital freed up by months of loose credit policies.
Not only are the country’s major housing markets zipped up by government policies, many other investment avenues have also been closed off.
For investors who might previously parked excess cash in apartments in Sydney or Vancouver, the NPC meetings in Beijing served as an opportunity for Chinese officials to pull in the reins on cross-border capital flows. “Some of this outbound investment was not in line with our own policies and had no real gain for China, ” China’s central bank governor Zhou Xiaochuan said annual legislative gathering, according to the Financial Times.
And those words have already been turned into policy. Investors who might previously have bought homes overseas have been required since the first of the year to sign a pledge not to use foreign currency for real estate purchases, when making applications to transfer funds overseas