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News Analysis: Home purchase limits lose favor in China

English.news.cn   2014-08-30 17:15:28

BEIJING, Aug. 30 (Xinhua) -- This week has seen more Chinese local governments lift home purchase limits in a bid to boost the sluggish property market.

Hangzhou, Xi'an and Guiyang all announced the move on Thursday, ahead of the "Golden September and Silver October," usually the busiest months for property sales.

Of all the major cities operating purchase limits introduced to cool the once-hot property market, nearly 80 percent have now removed them.Beijing, Shanghai, Guangzhou, Shenzhen, Zhuhai, Sanya, Nanjing, Xining and Lanzhou have yet to do so.

But Kuang Xianming, director of the Economic Research Center at the China Institute for Reform and Development, said that it will become the trend for local governments to phase out home purchase limits.

They started in 2010, when the municipal government of Beijing introduced such measures to curb rising home prices and wide-scale speculation in the property market.

Similar measures were rolled in 47 other major cities in the following years.

The measures have helped checked property prices. China's property market is experiencing an obvious downturn. Out of an official sample of 70 major Chinese cities, more than 90 percent reported month-on-month property price declines in July.

Along with the cooling of the property market and shrinking speculative activities, there is little reason for home purchase limits to exist and these temporary administrative measures will gradually be removed to give way for the market to play the key role, said Zhang Dawei, chief analyst at real estate agent Centaline Property.

Though speculation has successfully been suppressed, there has always been strong opposition to administrative or non-market measures, noted Chen Huai, a researcher at the Chinese Academy of Social Sciences.

The new government has been relying more on the role of the market, so it is the right time for such administrative measures to be removed, Chen said.

A Moody's report on Friday forecast that national contracted property sales for the rest of 2014 will improve moderately, supported by a greater number of new project launches, an increase in mortgage availability, and the selective loosening of home purchase restrictions.

However, Fitch Ratings warned in a report in early August that the loosening of property curbs and the easing of monetary policies in China may unintentionally increase speculation on residential property. This may not be conducive for the positive restructuring of the homebuilding sector in the long term.

The relaxation of home purchase restrictions this year may fail to boost sales meaningfully in light of the prevailing negative sentiment among potential buyers, the report said.

More significantly, further relaxation, without the introduction of other anti-speculation measures, may pose risks of encouraging and re-igniting speculation on residential property in the long term, as was experienced in 2009, it said.

While the government is phasing out administrative measures in the property sector, it must further reform land management, step up construction of affordable housing and cut taxes and fees for the property sector, Kuang urged.

Related:

In pictures: E China's Hangzhou lifts housing purchase limits

Two more China cities lift housing purchase limits

BEIJING, Aug. 28 (Xinhua) -- Two major Chinese cities joined dozens of others nationwide to scrap housing purchase restrictions on Thursday in a bid to boost their property market.

The municipal housing security and management bureau in Hangzhou, capital of east China's Zhejiang Province, moved to lift three-year-old restrictions on homes smaller than 140 square meters. The policy will start on Friday. Full Story

Editor: Yamei Wang
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