China to control credit flow into property

Top leaders vow action to safeguard against housing bubbles even as home prices edge up

China will rein in excessive bank credit flows into the property market so as to "strictly safeguard" against potential housing bubbles and contain risks.

Vice-Premier Zhang Gaoli yesterday warned that the trend of capital flowing into the property market could lead to bubbles forming.

And Mr He Lifeng, head of China's top economic planning commission, echoed the view that excessive capital in the property market has driven up prices rapidly in first-tier cities and some second-tier cities, leading to higher costs for the real economy.

"We will control the excessive flow of credit into the property industry," said Mr He, chairman of the National Development and Reform Commission.

Both leaders were speaking at the China Development Forum held in the capital, Beijing.

Their comments come as China's property market edged upwards last month, showing signs of a rebound after a slew of cooling measures across dozens of cities last October slowed price gains.

New home prices across 70 cities rose 0.3 per cent last month over the previous month, according to Reuters calculations based on data from the National Bureau of Statistics last Saturday.

Another set of data released on Tuesday pointed to a surge in property sales by floor area in the first two months of the year. Sales were up 25.1 per cent from a year earlier.

China's policymakers have been stressing since last December that "houses are for people to live in, not for people to speculate".

They have vowed to keep a lid on runaway property prices while keeping the market stable this year, as the country prepares for a major leadership transition later this year.

"We are now guiding capital towards the real economy, so that our real economy can be developed. Now, some of the capital has gone to the property market. If not properly managed, this could form bubbles," Mr Zhang told senior Chinese government officials, global business leaders and top economists.

"We will strongly safeguard against it, and adjust steadily step by step," he added.

He also said the government will continue to implement policies targeted at individual cities to reduce the housing stock in smaller third- and fourth-tier cities.

For now, the city-based measures are mostly aimed at cooling the red hot market. Since the close of the annual parliamentary session on March 15, at least six cities, including Beijing, have announced new policies to curb sales.

The minimum down payment for a second home in Beijing has risen to at least 60 per cent, from 50 per cent. And Guangzhou last Friday said singles and non-local residents can buy only one property, while the minimum down payment for a second property will be raised from 30 per cent to 50 per cent.

A version of this article appeared in the print edition of The Straits Times on March 20, 2017, with the headline 'China to control credit flow into property'. Print Edition | Subscribe