Local authorities are finding ways to soften the blow of China’s tight real estate policies without incurring Beijing’s wrath

·4-min read

More Chinese cities have watered down tougher cooling measures in a bid to shore up faltering property market sentiment, but analysts say the wind-back efforts are small and in line with the central government’s mantra that “housing is for living, not for speculation”.

The local government in Wuhan, capital of Hubei Province in central China, said last week that the senior management of companies headquartered in the city are now free to buy homes regardless of whether they are residents or non-residents – a status that is defined by China’s household registration system, or hukou.

Until recently, only non-residents who had lived in the city and paid into the social security fund for two years were allowed to buy a home in Wuhan. Local residents are allowed to buy two flats.

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“It is a pretty clear loosening of policy, making sure the tone on the property sector is not too harsh,” said Yan Yuejin, director at Shanghai-based E-house China R&D Institute. “However, Wuhan did not implement it as a stand-alone property policy targeting everyone. The change was embedded in an announcement to encourage the wider economy, so as not to be too eye-catching.”

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Wuhan’s policy fine-tuning is in contrast to events in Shenyang, capital city of northeastern Liaoning province. State-backed media outlet Cailianshe reported on October 10 that the city’s housing authority had summoned developers and told them it would fully loosen curbs.

Shenyang’s proposed changes included lifting the two-home purchase cap and the five-year resale restriction, waiving an extra property sale tax and allowing mortgages for people wishing to purchase more than one home, according to a document widely-circulated online.

However, local authorities later denied any such changes. “We haven‘t received any notice on loosening curbs, and restrictions remain unchanged,” the local property registration bureau in Shenyang told the South China Morning Post last Friday.

People familiar with the situation, who asked to remain anonymous as they are not authorised to speak with the media, told the Post that substantive possible changes had been mentioned at a meeting but nothing had been printed or put into effect yet.

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Chinese developers have been on edge ever since Beijing stepped up its scrutiny of highly-leveraged builders with the central bank’s so-called three red lines of loan caps in August 2020. That stopped the heaviest borrowers from taking on more debt, pushing the likes of China Evergrande Group – with more than US$300 billion in liabilities – into deep financial trouble as it struggled to generate cash to pay debt.

The escalating crisis at top developers like Evergrande, Sichuan Languang Development, Fantasia Holdings and Modern Land (China), all of which have either missed or defaulted on bond payments, has badly knocked confidence in China’s property market. This has led to many cities joining a chorus for tighter real estate policies to be rolled back.

Last month, housing authorities in Yiwu in the eastern province of Zhejiang, said that developers could restart presale activity as soon as they launch a residential project, reversing their decision in August, when developers had to apply for presale permits in tranches once every three months.

Meanwhile, Shenzhen, Nanjing and Suzhou have all relaxed conditions for taking part in land sales. “The macro environment is warming up, but [the central government] will not allow drastic changes [to tighter policies] to be allowed to drive up home prices [again],” said Yan.

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