CHINA’S local governments are introducing measures to rein in soaring housing prices, with the southern cities of Guangzhou and Shenzhen the latest taking steps to cool overheated real estate markets, including higher mortgage down payments and home purchase restrictions.
A property boom has boosted China’s economy this year, fueling demand for items such as construction materials and furniture, but a growing buying frenzy is adding to worries about ever-rising debt and risks to the banking system.
The new measures are the latest steps to tighten credit flowing into the property sector as the government tries to balance the need to prevent bubbles while stimulating economic growth.
Prices for new homes in the booming tech center of Shenzhen rose 36.8 percent from a year ago in August, while Guangzhou’s home prices rose 21.1 percent over that period, National Bureau of Statistics data showed.
Other cities including Chengdu and Wuhan have already announced new restrictions on property purchases as the government tries to dampen prices stoked by property speculators in second- and third-tier cities.
The average new home price in 70 major cities climbed an annual 9.2 percent in August, up from 7.9 percent in July, according to the National Bureau of Statistics.
Nomura analysts said the new measures in the big cities should prevent the market frenzy from spilling over into smaller cities.
“We also believe it unlikely that the latest tightening measures will cause the bubble to burst, sparking a collapse of home prices. We envision a more likely scenario to be a mild retreat or prolonged flattening of home prices in first-tier cities,” the Nomura analysts said in a note on Tuesday.
First-time home buyers in Shenzhen will face minimum down payments of 30 percent, but deposits for others will be raised to no less than 50 percent, according to a government document.
Down payments for second-home buyers in China’s southern Guangdong Province near Hong Kong will be increased to no less than 70 percent.
Guangdong’s capital city of Guangzhou has limited local residents to buying a maximum of two properties, according to a statement posted on Tuesday on the Guangzhou government’s website.
Non-local residents will be allowed to buy one property, if they can prove they have paid appropriate levels of tax or social security.
In last week, a total of 12 cities including Beijing, Hangzhou and Tianjin have restricted buyer qualifications, limited purchase amounts or raised down payments.
Last Friday Beijing raised the down payment for first-time buyers from 30 percent to 35 percent. The deposit for second home purchases must now be at least 50 percent.
Hefei, capital of east China’s Anhui Province, on Saturday decreed that the price of any property must remain unchanged for six months after registration.
Separately, Suzhou in China’s eastern Jiangsu Province has unveiled fresh measures, including higher downpayment requirements, to cool the housing market.
Rising property prices have been generating many headlines. Prices in megacities like Beijing and Tianjin have soared in the past two months, fueling talk of a property bubble.
The Ministry of Housing and Urban-Rural Development on Monday said that 45 property developers or agents were being investigated for stoking speculation through false advertisements, rumors and breaches of presale rules.
Prices in 100 major Chinese cities rose 14.9 percent in the first nine months of this year, with August and last month seeing record month-on-month growth of more than 2 percent, according to the China Index Academy, a private property research institute.
Shrinking profits in the real economy and expectations of yuan devaluation have led to capital flooding into the property market, the academy pointed out.