by Xinhua Writer Jiang Xufeng
BEIJING, April 29 (Xinhua) -- With the recent cooling down of the red-hot housing market, some Chinese local governments have eased their grip on home purchase restrictions set years ago that were aimed at curbing the property price surge.
Nanning, the capital city of south China's Guangxi Zhuang Autonomous Region, announced last week that residents of five neighboring smaller cities in the Beibu Gulf Economic Zone can now enjoy the same right as Nanning dwellers to buy homes in the capital.
Previously non-locals needed to present documents of paying local income taxes for at least one year to become eligible for buying homes in Nanning, a restriction imposed since 2011 to discourage speculative investment in the property market.
Home prices began to rise steeply since the second half of 2009, partly fueled by record bank lending. The soaring prices spurred complaints from ordinary Chinese as well as fears of a housing bubble.
Governments at all levels had taken a string of measures since 2010 to regulate the runaway market. Many cities including Beijing, Shenzhen and Nanning set restrictions on home purchases including higher down payment ratios and imposing caps on the number of apartments a family can buy.
These measures have taken effect as the world's second largest economy grows at a milder pace.
The recent property market slowdown has also affected Nanning. Transactions of newly-built homes in the city rose 10.6 percent in the first quarter year on year. But the growth rate sharply decelerated from the 38.8 percent in the first quarter of 2013, local government data showed.
Nationwide the total area of property sold in the first quarter edged down 3.8 percent year on year, and combined sales revenue went down 5.2 percent year on year, National Bureau of Statistics (NBS) figures revealed.
The slower property investment pace was deemed as a major drag on China's fixed asset spending in the first quarter, which in turn weighed on broader economic growth that dipped to 7.4 percent during the period.
Real estate investment accounted for 13.6 percent of the nation's gross domestic product (GDP) growth in 2013, NBS figures showed.
Nanning is not the only Chinese city to loosen its property market control in the past week.
Wuxi, a third-tier city in east China's Jiangsu Province, announced that migrant workers who have a stable job in the city and buy a home bigger than 60 square meters from May 1 can get its hukou. The city earlier set a hukou threshold of purchasing a home larger than 70 square meters.
The rigid hukou system, or Chinese household registration, ties access to basic local welfare and public services to one's place of residence.
Moreover, policymakers in Tianjin may mull easing home buying restrictions in its Binhai New Area, a key reform pilot area, to bolster the sagging housing market, local media reported on Tuesday.
Due to the big role played by land sales and property development in buttressing local governments' fiscal revenue and economic growth, local authorities have the incentives to raise land sale prices and ease home purchase restrictions, especially during a period of price downward pressure. But the central government has not given a greenlight to loosening home buying limits nationwide.
In metropolitans like Beijing and Tianjin, home prices are growing at a slower pace this year, while many second- and third-tier cities are experiencing property price declines. Lower home prices will lead to dampened property investment enthusiasm and dwindling local government revenue.
Chinese people's expectations about house prices seem to be changing this year and more of them are taking a wait-and-see approach amid reports of new housing projects cutting prices in cities including Hangzhou and Shenzhen, said Chen Huai, a researcher at the Chinese Academy of Social Sciences.
Some cities intended to aid the local property sector to buoy short-term economic growth, but they need to heed the side effects of a property-centered economic growth model as it can lead to high housing inventory or even ghost cities, analysts cautioned.
"The adjustment of the property market will be the biggest challenge for China's economic growth this year," said Wang Xiaoguang, a professor at the Chinese Academy of Governance, adding that local governments should not embark on the old journey of bolstering the property sector to support economic growth.