Chinese city tightens property rules in sign authorities getting tough

BEIJING (REUTERS) - A Chinese city has toughened rules on house buying as it wrestles with one of the country's highest rates of house price inflation, in a sign that authorities may be injecting more urgency into a troubled campaign to cool home prices.

Zhengzhou, the capital of central Henan province, will bar people without residency permits who have lived in the city for less than three years from buying second homes, and prohibit residents under 20 from buying any property, the city's Housing Bureau said in a statement on its Sina Weibo microblog.

China's central government has pushed to rein in house prices over the past four years, mindful of a possible asset bubble and discontent among ordinary Chinese priced out of the market.

But the campaign has run into resistance from many regional cities, which rely on land sales to boost revenue.

"The local government in Zhengzhou is under pressure from the central government to meet its target for house price increases this year," said Liu Yuan, a head of research at China's biggest property brokerage Centaline, in Shanghai.

"Other cities with similar rates of appreciation might be next in line."

House prices in Zhengzhou rose 11.7 per cent in July from a year earlier, official data showed, compared to a 9.3 per cent growth rate of urban disposable income in the first half of this year.

The rise was one of the biggest in China, comparable with those in major cities like Beijing and Shanghai.

"The partial adjustment of property purchase restrictions aims to further curb speculative demand while protecting and supporting owner-occupier demand," the Housing Bureau statement said.

The rules went into effect on Sunday.

Zhengzhou had vowed to cap 2013 private sector home prices rises below the rate of urban disposable income growth.

Eight more cities among the 70 tracked by the National Bureau of Statistics (NBS) had year-on-year home price gains in double-digits in July, and could be next to hear from the central government.

Two private surveys released on Monday showed property inflation quickened in August for a second straight month.

Rising property prices have helped the broader economy weather a slowdown, presenting a dilemma for the authorities as they look to balance controlling prices while not depriving the economy of a growth driver.

Last month, the eastern city of Wenzhou relaxed curbs on purchases of second homes.

It was the only city among the NBS's 70 to see annual price falls in July.