China’s local authorities issued a record number of policies designed to support the property market in February, with more expected to follow in March to cushion the economic blow from the coronavirus outbreak.
More than 60 Chinese cities issued at least 75 property policies, the highest on record, according to Centaline Property. They were mostly aimed at taking some pressure off developers and boosting sales as the market struggles under the weight of the epidemic.
But some of the measures brought in by local housing regulators could end up being quickly reversed under pressure from Beijing, which is reluctant to fuel what it sees as a bubble, analysts warned.
“It’s likely that more policies could be issued in March because the epidemic is likely to be eliminated by the end of April,” said Zhang Bo, chief analyst at 58 Anjuke Real Estate Research Institute, a Shanghai-based property research firm.
“But in the second half or the fourth quarter, some policies will have to be gradually cancelled when developers’ operations normalise.”
Local governments will have to help ease pressure on property developers, which have seen increasing bankruptcies, he said.
China’s 16 trillion yuan (US$2.31 trillion) property market is reeling from the viral epidemic which has claimed more than 3,000 lives and infected at least 80,000 people in the country. Sales among the top 100 developers in February fell 37.9 per cent to their lowest level in years, according to consultancy company China Real Estate Information Corp.
New property policies in the first half of February focused on easing the pressure on developers, by allowing them to delay payments for land or pay by instalments, and eased the criteria for receiving sales certificates.
In the second half of the month, however, local governments started to stimulate demand in the market, in particular by loosening controls on the use of housing provident funds (HPFs) for home purchases.
Similar to housing fund programmes in other countries, HPFs combine saving and retirement accounts with subsidised mortgage rates to encourage employees to save towards buying their own houses.
On February 21, Zhumadian city in central Henan province became the first to lower the minimum down payment for home purchases by 10 percentage points to 20 per cent. The city also increased the loan quota for people using an HPF by 50,000 yuan, and required financial institutions to lower their home mortgage interest rates.
But the policies were short-lived after the news roiled the market and local authorities became concerned that it could be too strong a step out of line with Beijing’s direction. The policy was withdrawn after just a few days, when the Henan provincial government demanded it.
The same pattern occurred in Guangzhou city. Just a day after it was announced, the government deleted a new measure that allowed commercial service properties – such as shops and flat units operated as hotels – to be sold to individuals.
“The control policies in March will focus on easing the restrictions on people who really need to buy a house,” said Zhang Dawei, chief analyst in Beijing at Centaline Property. “The government will insist that houses are for living in and not for speculation.”
That process has already begun in some places in recent days. Wenzhou city on March 3 offered 50 per cent discounts on home purchases for professional people that meet certain criteria, Changzhou city ordered that the processing of HPF provisions be quickened, and Dongguan city has issued tighter restrictions on the scope of housing price growth.
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