Beijing tightens curbs on home purchases

A high-rise in Beijing under construction. Amid a year-long slump in China's housing market, there are fears that bubbles are forming in some big cities, even as prices in smaller cities languish.
A high-rise in Beijing under construction. Amid a year-long slump in China's housing market, there are fears that bubbles are forming in some big cities, even as prices in smaller cities languish.PHOTO: REUTERS

Move follows price surge in one area, raising fears that other cities may follow suit

BEIJING • China's capital city is stepping up curbs on property market speculation after prices surged in one area of Beijing, raising concerns that some bigger cities may also tighten home purchase rules.

A year-long slump in the housing market has been a drag on the world's second-largest economy, but there are fears that bubbles are forming in some big cities even as prices in smaller cities languish.

Analysts say that other cities, however, are not expected to follow Tongzhou district, a south- eastern suburb of the capital, as prices in that area have been fuelled by expectations that it would become a sub-administrative centre for the local government.

Under the new rule, non-residents of Tongzhou district and those who have not paid social insurance or taxes there for at least three years, are barred from buying second homes in the area, said the Beijing municipal commission of housing and urban-rural development, in a statement on its website last Friday.

The commission said that to buy their first home in Tongzhou, people without Beijing housing registration must have paid more than five years' worth of taxes or social insurance, with three years of that registered in Tongzhou.

It added that previous restrictions would remain.

Previously, to buy homes in the area, buyers were not required to have paid three years of taxes in Tongzhou or be registered as residents in Tongzhou.

Analysts say market conditions remain weak in smaller cities. "We do not see this as a signal that the favourable policy stance will reverse in the short term, especially in the lower-tier cities," property analysts at Barclays said in a note.

The capital city's property controls have always been more stringent than those in other cities, as residents there are barred from owning more than two homes, while non-residents who have paid more than five years' worth of taxes can buy no more than one property in the city.

Chinese cities relaxed home purchase restrictions last year amid slow economic growth, with only four first-tier cities keeping the rules unchanged.

While home sales and prices have improved in bigger cities in recent months after a barrage of government support measures, a huge overhang of unsold houses in small cities still keeps the housing market under pressure.

July property price data for 70 of the biggest Chinese cities is due today, and analysts expect prices to have risen further from the previous month on improved sales and market sentiment.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 18, 2015, with the headline 'Beijing tightens curbs on home purchases'. Print Edition | Subscribe