18 April 2019

Fresh home curbs an admission of failure by local authorities

Local authorities in cities with runaway home prices have been summoned by the Ministry of Housing and Urban-Rural Development and urged to “do something” to rein in the market, according to the mainland’s Economic Information Daily.

Property prices have been spiking in some second-tier cities recently. For example, home prices in Nanjing, Xiamen, Changsha, Wuhan and Nanchang have seen gains in the 10-17 percent range last month compared to a year earlier, National Bureau of Statistics data shows.

After four first-tier cities — Beijing, Shanghai, Guangzhou and Shenzhen — took new measures to curb housing costs, nine lower-tier cities followed and announced their own moves, bringing the total number of cities that aim to tame the housing prices to thirteen. Fuzhou, Hangzhou and Nanjing were the latest to unveil their tightening measures this week.

Back in March, the State Council issued five policies and measures to regulate and control the country’s soaring real estate market. The policies clearly stated that local governments must compile and publish annual new commercial house price control targets and establish an effective system of accountability for assessing price stability.

As a result, most cities have set targets to contain new-home price growth within the average local disposable income gains in percentage terms. But clearly, many cities are going to fail in the mission.

Peng Peng, a Guangzhou-based researcher at the Chinese Academy of Social Sciences, told that fresh housing policy tightening could be interpreted as an admission that the cities will not be able to meet their targets this year. “What they are doing right now is to let the public know that they have already done all they can to stabilize the housing market,” he said.

So far, measures like raising the down-payment for buying second-homes have done little to address the supply and demand imbalance in the mainland property market. Additional measures, including the much-talked-about property tax expansion, could be in the pipeline.

Given this situation, property developers have seen their shares come under pressure on the stock market in recent sessions. Although home sales have been great this year, there are some doubts as to the prospects going forward.

Yuexiu Property (00123.HK), Shimao Property (00813.HK) and China Resources Land (01109.HK) have seen share price declines in the 6.2 percent to 8.2 percent range since the Communist Party’s 18th Central Committee concluded its third plenum on Nov. 12.

– Contact the writer at [email protected]


EJI Weekly Newsletter

Please click here to unsubscribe