First Chinese city openly relaxes housing controls

BEIJING (REUTERS) - A city in northern China re-affirmed its decision on Friday to allow people to buy more than one home, after appearing earlier this week to have rowed back on a move that could risk angering the central government.

Hohhot, in the Inner Mongolia region, is the first city to openly relax housing restrictions.

Any moves that fuel demand can be controversial with home prices already near record levels. The central government would prefer local governments to stand firm in stamping out property speculation as far as possible as it fears that unaffordable property could become a cause of social unrest.

But, some regional governments, who depend on land sales from a buoyant property market for a large chunk of their revenues, have quietly loosened controls.

Hohhot's housing department confirmed in an online statement, however, that restrictions on home purchases had been removed, and people can buy more than one home, regardless of whether they are registered as residents, popularly known as having a hukou.

An online circular issued earlier this week appeared to suggest that Hohhot had second thoughts about relaxing the curbs, but it was swiftly removed.

Real estate analysts were unsurprised that Hohhot is showing support for its property market. Based on an assumption that developers can sell 1,000 homes a month, Hohhot has about three years worth of unsold housing stock, according to data from a research institute of real estate services firm E-House China .

E-House data also showed new home sales in Hohhot dropped around 17 per cent in the first five months of this year compared to a year ago, though the drop is relatively modest compared to more drastic declines of over 50 per cent elsewhere in China.

Given the performance of China's property market is diverging between different cities, the housing ministry said this month that local governments can set policies based on their own needs, suggesting that they have some room for flexibility.

But analysts expect most housing restrictions introduced over the past five years to remain in place, particularly in large cities where prices are the frothiest.

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