Shenzhen toughens local residency requirements to douse 'violent surge' in China's hottest residential market

By Pearl Liu / | July 16, 2020 1:38 PM SGT
Shenzhen has tightened rules on home purchases by introducing additional residency and tax requirements to douse a "violent surge" that turned China's Silicon Valley into the hottest property market in the country.
Residents with hukou in the south-eastern city bordering Hong Kong will be only be allowed to buy a home if they have held the so-called local household registration paper for more than three years, according to a statement published by the Housing and Construction Bureau on Wednesday. Families will be restricted to owning two homes, while singles to one, it added.
Besides, they are also required to show proof of their income tax or social security payment history for three consecutive years in the city, according to the statement. The three-year residency rule does not apply to those without a hukou, who are currently required to pay more than five years of social security funds to qualify for the right to buy a home in the city.
Shenzhen's residential market is springing back to life from a coronavirus-induced slump earlier this year, as a 41 per cent surge in transaction volume in the first half makes it the costliest among all mainland cities. Prices in Shenzhen have risen 12 per cent on average in the past year through May, outpacing gains in 70 major Chinese cities tracked by the National Bureau of Statistics.
"The cooling measure is stricter than expected," said Li Yujia, senior economist with the Real Estate Assessment and Development Research Centre, a research arm of the city's government. "It shows that top officials are not happy with what is going on in Shenzhen."
Ample liquidity and persistent speculation have whipped up a market frenzy in the technology hub, home to behemoths like WeChat operator Tencent Holdings, telecommunication gear maker ZTE and drone manufacturer DJI. They have also contributed to recent price increases in neighbouring Greater Bay Area cities such as Dongguan and Foshan, causing a headache to state planners.
Existing homes in Shenzhen, one of the 11 cities within the bay area, stood at 65,083 yuan (US$9,310) per square metre on average in June, or 3 per cent higher than in Beijing, according to data compiled by property agency Lianjia.
"The home-price increase in Shenzhen can be described as a violent surge," said Li at the local government's research centre. "It is definitely going against the central government's core message, which is 'housing is for living, not for speculation', and thus cannot be tolerated," he added.
About 44,000 existing homes changed hands in the first half year in Shenzhen, up 41 per cent year on year, according to data compiled by Centaline Property Agency.
The latest curbs came as past measures to rein in home prices have failed to achieve their objectives. The local government began limiting home ownership in 2010 for local and non-local residents, and progressively imposed tax and social security requirements for non-hukou holders through 2016. In 2018, it banned companies or organisations from buying residential units, and slapped a three-year holding period for re-sale units.
"It is mainly due to the ample money freshly injected into the economy [by the Chinese central bank]," said Yan Yueijin, director of E-house China Research and Development Institute. "People feel that at this moment, buying a home in Shenzhen, which has kept receiving favourable policies such as being chosen as the model city for the country and being a key city in the Greater Bay Area plan, is safer than doing other business."
While the rules on three-year residency and tax records are pretty tough, the new rules seek to flush out speculators, who descended on the city to get a hukou but only for the purpose of flipping their property for a quick buck, said Yan.
The People's Bank of China has vowed to keep financial liquidity at a reasonable and adequate level to help the economy overcome the coronavirus fallout. New loans are expected to reach about 20 trillion yuan this year, while the total amount of social financing is poised to exceed 30 trillion yuan, it added.
Since late April when the pandemic began to ease, Chinese consumers have engaged in so-called "revenge spending" of everything from clothes to smartphones and housing.
In one crazy scene on June 11, some 3,000 people swarmed the showrooms at the launch of a new development in the city's Guangming district to join a ballot for the right to buy one 394 units of flats on offer.
"The new measures have put a brake on the overheating housing market in Shenzhen," Li at the research centre said. "We could see home prices going down in the second half, but there will not be a plunge. The aim is to stabilise home prices."
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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