China’s cabinet has expanded home purchase caps to more cities, reminding local governments to enforce measures to regulate the property market, in its latest move to cut back on property inflation.
China has also ordered local governments to increase their efforts in building low-cost housing and regulating rental prices, as Beijing has made it a priority to check increasing prices, which have lead to social unrest in the past.
While imposing moderation on increasing prices of residential properties in most cities, the cabinet meeting concluded that “some cities are still facing pretty high upward pressure on home prices and others are relaxing their tightening efforts.”
“Right now, the property tightening campaign is at a critical point and we must stick to the same direction and maintain the same force of tightening measures,” said the cabinet in an online statement.”
Since late 2009, the government has been enforcing measures to curb speculation in the housing market, including higher down payments and mortgage rates, as well as new property taxes in Chongqing and Shanghai.
“That means the central government will not relax its tightening policy anytime soon and that’s within market expectations,” said Li Shaoming, an analyst at China Jianyin Investment Securities in Beijing.
The government’s tight controls on the number of homes a family can own, is considered an effective tool in curbing speculation and stabilising prices in approximately 40 cities.
However, prices are still rising in other Chinese cities, as speculation is rife in markets in which acquisition restrictions are non-existent.
“Those that have imposed home purchase restrictions must continue to implement the policy, while the second- and third-tier cities where home prices are rising too fast should also adopt necessary purchase limits,” it said.
The industry sees Beijing’s restrictions on demand as a scheme to provide time to construct affordable homes, lower average home prices and address social complaints.
China will increase government loan support and investment, together with efforts to channel private funds, to meet this year’s goal of constructing 10 million low-cost homes nationwide, according to the cabinet.
So far it has reached over half the target by the end of June – an improvement from 34 percent in May.
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