China’s capital, Beijing, banned single-person households from buying more than one residence and increased the minimum down-payment for all buyers of second homes as the government seeks to cool the property market.
The new measures take effect today, the official Xinhua News Agency reported yesterday. The city will also enforce a 20 percent tax on capital gains from property, it said. Current rules allow each household with a Beijing residence permit to buy a second home, opening the way for couples to divorce on paper to double their ability to invest.
“This will help to calm people’s panic about home prices,” said Yi Xianrong, a Beijing-based researcher at the Chinese Academy of Social Sciences, which advises the Cabinet. “At the same time, restrictions on home purchases don’t change the fundamental demand, and it seems the new measures in Beijing are aimed more at short-term problems rather than long-term healthy development of the property market.”
Prices in the capital jumped 5.9 percent from a year earlier in February, the biggest increase since February 2011, China’s National Bureau of Statistics said March 18. Prices across the country rose 160 percent in 1998-2011 after ownership passed into private hands, government data show.
The city government of Shanghai, where new home prices in February rose 3.4 percent from a year earlier, also issued a notice saying the city will increase down-payment requirements and interest rates for second-home mortgages, while prohibiting banks from providing credit to third-home buyers.
The measures come a month after former Premier Wen Jiabao, during his last days in office, ordered the central bank to raise down-payment requirements for second mortgages in cities with excessive price gains and told local governments with the biggest price pressures to tighten home-purchase limits.
China has “very serious” property market bubbles in some regions, Xiang Songzuo, chief economist of Agricultural Bank of China, told a forum in Beijing March 29. China’s property curbs have seen “very limited” results as these measures are focusing on limiting demand while China should instead focus on boosting supply, Xiang said.
The measures announced by Beijing yesterday will depress property trading in the city in the next six months, Hu Jinhui, vice president of Bacic & 5i5j, the second-biggest real estate broker in Beijing, said in a statement.
“Home prices will firstly stop rising before a possible moderation in the second half,” Hu said.
Beijing, a city of about 20 million residents and a magnet for migrants from other provinces, has been implementing other rules including banning residents from buying more than two homes. Shanghai has been banning unmarried non-locals from buying homes in the city.
— With assistance by Dingmin Zhang