Shanghai, Shenzhen lead China’s biggest cities in latest clampdown on housing market speculation after bubble warning

Pearl Liu
·3-min read

Some of China’s biggest and most affluent cities have introduced new administrative measures to stem runaway home prices, after a top banking regulator flagged concerns about a bubble in the domestic real estate market.

Local authorities in Shanghai, Hangzhou and Shenzhen imposed new market curbs on Wednesday, including a ban on flipping homes for a quick profit and more stringent qualification criteria for first-time buyers, according to notices published on their websites. The new measures added to steps over the past few months since authorities in August issued so-called three red lines on corporate leverage in the industry

The move came a day after Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said he was concerned about the bubble in domestic real-estate prices, which could threaten China’s financial sector and economic stability.

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“Many people buy homes not to live in, but to invest or speculate,” he said, likening the property market leverage to a “grey rhino” risk to the broader economy. “This is very dangerous.”

Shanghai, the country’s commercial and financial hub, banned homeowners from reselling their new homes within five years, its housing watchdog said late on Wednesday. There were no restrictions on flipping them previously.

Hangzhou, the capital of eastern Zhejiang province and home to some of the nation’s largest fintech groups, on the same day tightened rules on foreclosed homes. It stipulated that buyers must first be qualified to buy a residential home, before they are allowed to transact in such properties.

In the past, buyers who have exhausted their quotas have turned to those homes foreclosed by lenders to skirt ownership restrictions, analysts said.

In Shenzhen, new residential projects in the city dubbed China’s Silicon Valley have begun to adopt a points based scoring system to prioritise deserving first-time buyers and push back those already with existing homes.

Among others, a person without home ownership or transaction record for more than 10 years in the city will be awarded 40 points, and those without a home but with past transaction history would receive 20 points. People with higher scores would be ahead in the queue for quota.

“It is a very clear signal that a battle to curb runaway home prices in major cities has started on a national scale,” said Yan Yuejin, director of the Shanghai-based real estate think tank E-house China R&D Institute. “The government, from the top to local authorities, has been very determined,” he added.

Shanghai, Shenzhen and Hangzhou’s economies were worth a combined 8.24 trillion yuan (US$1.3 trillion), accounting for about 8 per cent of national gross domestic product in 2020, according to government statistics. The three cities recorded home-price appreciation above the national average in 2020, according to a CBRE survey.

Guo of the CBIRC is not the only official to galvanise the latest drive to rein in market excesses. Deputy housing minister Ni Hong also emphasised the matter during a visit to Hangzhou and Wuxi, also in eastern Jiangsu province.

“The central government has highlighted solving home affordability issues in major cities as one of the major tasks,” Ni said, reiterating the state mantra that “homes are for living in, not for speculation”.

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