Several Chinese cities ease housing curbs to stimulate growth

October 24, 2019 12:14
Hainan province saw  housing sales area, value and property development investment slump after it imposed stringent home purchase restrictions. Photo: Bloomberg

China’s economic growth slowed to its weakest pace in 27 years in the third quarter.

Semi-government think tank China Finance 40 Forum (CF40) suggested that the government should cut interest rates and loosen housing curbs to stimulate the economy.

In fact, Tianjin, Nanjing and several other cities across the nation have already eased restrictions on the housing sector.

The Tianjin municipal government announced last week that those who work in the Binhai science park and Baodi science city will be allowed to buy one apartment each even if they don’t fulfill local social security or individual income tax contribution requirements. However, they are not allowed to resell those flats within three years.

Nanjing, the capital city of Jiangsu province, has unveiled similar measures. College graduates with local residence permits are allowed to buy a flat in Liuhe District, the city’s tech zone.

Both Tianjin and Nanjing have only relaxed home purchase restrictions in specific areas.

Sanya city in southern China's Hainan province has taken a more dramatic shift. College graduates who have worked in Sanya for at least 12 months and paid social security and individual income taxes for 12 months are allowed to buy one apartment anywhere in the province.

In April last year, Hainan imposed stringent home purchase restrictions. Non-locals must have paid at least two years of individual income tax or five years of social security contributions before they could buy an apartment in the province. They also need to pay at least 70 percent of the home price as down payment and hold the flat for at least five years before reselling.

The housing curbs made an immediate impact. Hainan saw housing sales area, value and property development investment slump by 57 percent, 55 percent and 31 percent respectively in the first half of 2019 from the same period last year.

Falling home sales and investments have weighed on construction, furniture, logistics, home appliances and other sectors. Economic growth in the province slowed to 5.3 percent during the period.

So Sanya’s move to ease its home policy can be seen as a fine-tuning of its previous tightening move in order to balance the pressure to suppress speculation and the need to keep its economy humming.

This article appeared in the Hong Kong Economic Journal on Oct 23

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist