China Toughens Housing Policy as Shenzhen Imposes More Curbs

(Bloomberg) -- Chinese authorities dashed hopes they're set to ease up on a campaign to tame housing prices, with the southern city of Shenzhen imposing strict new curbs on property speculators and the central government signaling a tougher stance.

Home owners in Shenzhen will have to hold a property for at least three years before being allowed to sell, according to a statement on the city government's website late Tuesday. Local authorities also suspended home purchases by corporations and organizations, a popular loophole to bypass buying restrictions.

The central government has also reiterated its determination to keep a lid on the property market. The Politburo, made up of the country's 25-most senior leaders, said after a meeting Tuesday that China will clamp down on home-price gains, upping the ante from a previous stance of targeting “excessive” price growth. The government is seeking to rein in property prices without causing a sudden decline that could harm the broader economy.

“There has been some expectation on property policy easing lately, but the government sent a clear message yesterday that curbs will tighten rather than loosen,” said Yan Yuejin, a property analyst at China Real State Information Corp. in Shanghai. “The restrictions in Shenzhen are a signal that any price increases elsewhere in the second half may be followed by curbs.” 

Read more: Cracks are showing in property markets from Sydney to Beijing

Chinese developers fell in Hong Kong trading, led by Country Garden Holdings Co., which closed down 6.6 percent. China Vanke Co. fell 3 percent, and China Overseas Land & Investment Ltd. dropped 2.6 percent.

The People's Bank of China last week told some banks that a specific capital requirement will be eased to support lending, people familiar with the matter said at the time. The central bank has also cut reserve-requirement ratios three times this year, with the moves seen as alleviating the effects of a campaign to rein in debt.

The Politburo statement and Shenzhen curbs show authorities are worried that the easier liquidity will again flow into the property market and flare up price bubbles, Haitong Securities analysts led by Tu Lilei wrote in a note Wednesday. 

China is in the midst of a two-year campaign to cool the overheated property market, with cities across the nation rolling out a series of lending and buying curbs. In Beijing, more than 30 restrictions, from buying thresholds to mortgage curbs, helped send sales by area to a historical low this year.

Still, home prices in Shenzhen rose 5.6 percent in June from a year earlier, racing ahead of Beijing and Shanghai, where values declined. Overall, prices rose at the fastest pace in 21 months in June, with new home prices in 70 cities tracked by the government gaining 1.1 percent.

--With assistance from Shawna Kwan and Alfred Liu.

To contact Bloomberg News staff for this story: Emma Dong in Shanghai at edong10@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Peter Vercoe

©2018 Bloomberg L.P.

With assistance from Editorial Board