Chinese city backtracks on call to ease property controls

BEIJING (REUTERS) - A city in northern China on Wednesday appeared to rescind a decision to lift curbs on home purchases, highlighting the tension between central and regional governments over winding back controls on property.

The government in Hohhot, in the Inner Mongolia region, announced last week on its website that it would start allowing people to buy more than one home, regardless of whether they were registered as residents, popularly known as having a hukou.

The ceiling for bank mortgages offered at a preferential rate was also raised to 500,000 yuan (S$ 100,350) from 300,000 yuan earlier, the notice said.

But the online circular, which was seen by Reuters and was dated June 19, was deleted by late on Wednesday afternoon.

A call to the regional property regulator went unanswered, and a regional government official declined to say if the restriction on property purchases had indeed been lifted.

The about-turn underscores the conflict of interest between China's central and local governments when it comes to tempering the property market, where prices are still near record highs despite a current slowdown.

Worried that record low home affordability will cause social unrest, the central government has avoided relaxing curbs on the property market, despite some analysts fearing that a cooling housing market will worsen China's economic slowdown.

For local governments, which benefit from a buoyant property market through revenues from sale of land, the housing downturn is more painful and authorities are often eager to roll out support measures for the sector to counter the slowdown.

But some of these attempts to boost the real estate market have been blocked by Beijing, which hates to see home prices sprint even higher.

For example, Beijing forced governments in areas such as Wuhu in central China, Foshan in the south and Chengdu in the west, to retract their plans to relax housing controls in 2012.

So far, just a handful of Chinese cities, including Wuxi in the south, have eased property controls to support the housing market.

China's average home prices fell for the first time in two years in May and price weakness spread to more major cities, adding to downward risks to the broader economy.