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 Senior Chinese leaders raised concerns about the country's
overheated housing market during an annual parliament meeting this
month, and Shanghai is the biggest city to take action in the wake
of the National People's Congress, which ended a week ago.
Under the new rules, home buyers will need to put down 50-70 percent
of the price of a second home, compared to 40 percent previously, to
qualify for a mortgage.
"The new measure will have a big impact on market sentiment on both
the primary and secondary market; new launches being sold out within
one, two hours will not happen again," said Joe Zhou, head of East
China research at real estate services firm Jones Lang LaSalle.
With the new rules, Shanghai also made it harder for non-residents
to buy homes in the city, according to a statement issued by the
local government.
Potential buyers who do not hold local residence permits, or hukou,
must have paid social insurance or taxes in Shanghai for at least
five years before they can purchase property. Previously the
requirement was two years.
Shanghai will also increase the supply of small- and medium-sized
homes and crack down on property financing by informal financial
institutions.
Shanghai home prices gained 20.6 percent in February from a year
ago, posting the second biggest gain in the country after the
southern city of Shenzhen, where prices soared 56.9 percent, despite
slowing economic growth.
A research unit under the central bank's Shenzhen branch has asked
local banks to stop extending loans to home buyers who have applied
mortgage twice in the past two years, the official paper Securities
Times reported on Friday.
CHANGING RULES
Some analysts expected other major cities to follow Shanghai's lead
in tightening housing policies.
"The move is likely to become the turning point of the property
policy in the big cities," said Zhou Hao, senior emerging markets
economist at Commerzbank in Singapore.
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Last week, authorities in the 'second tier' eastern city of Suzhou
introduced measures to cool a red-hot housing market by putting a
cap of 12 percent on annual home price gains.
Shares of property-related companies showed little reaction to
Shanghai's action to curb the real estate market.
The CSI300 Real Estate sub-index and Shanghai Composite property
sub-index were up a touch over 0.2 percent by midday, roughly in
line with the broader mainland market.
So far, the turnaround in China's housing market has been confined
to the country's biggest cities. Small cities are still struggling
with high inventories of unsold homes with many unveiling measures
to stimulate home buying.
Zhou from Jones Lang LaSalle said he expected the new tightening to
mainly hurt home transaction volume, while prices would continue on
a moderate uptrend.
Xie Ji, general manager of Shanghai Region at state-backed China
Resources Land, expected that lifting the down payment requirement
would have a major impact on transaction volume in the secondary
market.
"The government is hoping to tamp down the 'over-excitement' in the
market," Ji said.
(Reporting by David Lin in SHANGHAI, Clare Jim in HONG KONG and
Xiaoyi Shao in BEIJING; Editing by John Ruwitch and Simon
Cameron-Moore)
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