China stymies 'experiments' aimed at whipping up housing market frenzy in many cities facing budget squeeze

By Iris Ouyang iris.ouyang@scmp.com / https://www.scmp.com/business/article/3086173/china-stymies-experiments-aimed-whipping-housing-market-frenzy-many-cities?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3086173 | June 2, 2020 2:54 PM SGT
Homebuyers in China are facing more policy flip-flops, as Beijing frowns on attempts by local governments in at least a dozen cities to whip up a property market frenzy, bolster land sales and jump-start growth.
Wuwei, a city of about 1 million people in the eastern Anhui province, issued new policies on May 20, including allowing owners to resell their properties without complying with a minimum two-year holding period.
The measures were aimed at energising a "healthy development of the construction and real estate sectors to tackle the coronavirus pandemic" and bolster its fiscal budget. By May 23, they had been taken down from the local government website.
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"Local governments continue to test the water for fast recovery of the property market under high fiscal pressure," said Zhang Bo, chief analyst at 58 Anjuke Real Estate Research Institute, a Shanghai-based property research firm. "The central government does not want to see such short-term" spurious measures to ensure stable prices, he added.
Prices of land for residential use in 100 major cities jumped 12.3 per cent in the first four months from a year earlier, according to E-house China Research and Development Institute. Sales on acreage basis have almost doubled during the period, despite more than a month of industry shutdown due to the pandemic.
The case in Wuwei mirrors other swift about-turns " some within 24 hours " in at least 11 cities across the country since late February, according to analysts and media reports compiled by the South China Morning Post. They included Guangzhou, tier-2 city Jinan and many smaller cities, such as Zhumadian in the central Henan province and Jingzhou in Hubei province.
Most of the policies attempted to lower down payments or mortgage rates, or to reduce the time restrictions for a house to be placed on the secondary market. Others included allowing residents to buy more houses than allowed previously.
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Many local governments are eager to tweak ground-level policies to raise funds for infrastructure projects, as directed by the central government, to rejuvenate the economy, after it posted its slowest expansion in the last quarter since the Mao era.
Land sales are a major, and the quickest, source of revenue generation for most local governments.
But Beijing has reiterated calls to rein in speculation in the property market on its way out of the Covid-19 pandemic, and especially during the ongoing National People's Congress.
As such, more policy reversals are in store, experts said. Some cities, especially lower tier ones, are experiencing weak sales and will have room for loosening market restrictions. Others may not have such an advantage, according to E-house.
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Property inventory in 100 major cities rose for the first time this year in April, rising 2 per cent from March, according to E-house, as local governments issued faster sale permits to developers. It will take about 13.1 months on average to clear the unsold stock, the institute said.
"The central government has emphasised that houses are for living and not for speculation," said Yang Hongxu, the deputy head of E-house. "It will be hard for local governments to break the bottom line."
 
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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