Shanghai to Limit Home Purchases, Introduce Property Tax, Government Says
By Bloomberg News - Oct 8, 2010 11:41 AM GMT+0800
Shanghai introduced new measures to curb home price gains including restricting home purchases to one per household, increasing the supply of residential land, and using a property tax to cool the real estate market.
“The government will proactively get well prepared for the introduction of the trial property tax,” the government said in a statement on its website yesterday.
Property prices in 70 major cities rose 9.3 percent in August from a year earlier, prompting the government to extend a crackdown on speculators and multiple home purchases. The latest measures are “more significant than expected,” analysts at Deutsche Bank AG wrote in a report dated yesterday.
“This in our view highlighted the strong determination of the central government and local governments to cool down the property market,” Deutsche Bank analysts led by Tony Tsang wrote. “Some bullish market participants might have under- estimated the strength and frequency of the government tightening measures.”
An index tracking 34 Shanghai-listed property developers rose 1.9 percent as of 11:03 a.m. local time, erasing losses earlier. Shimao Property Holdings Ltd. fell 0.6 percent after dropping as much as 2.5 percent, while Evergrande Real Estate Group Ltd. lost 1 percent.
The government of China’s richest city also ordered banks to stop extending mortgages to third-home buyers, in line with national policy. The city’s government will further regulate developers’ business operations and ensure market order, the statement said.
China’s State Council, or the Cabinet, on Sept. 29 raised the down payment to 30 percent for all first-home buyers to cool the property market. The down payment level previously applied only to homes larger than 90 square meters (969 square feet).
The government has since April raised the down payment and interest rates on second-home mortgages and restricted the number of new homes residents can buy in some cities.
“We believe short-term sentiment may be dampened, nevertheless, the potential impact from these new rules should not be overdone,” Citigroup Inc. analysts Oscar Choi and Marco Sze wrote in a report dated yesterday, referring to Shanghai’s measures. “Underlying demand should remain robust given the ample liquidity in the market, especially for cities like Shanghai, which can take purchasing power from different areas.”
Housing transactions in the southern city of Shenzhen surged 84 percent in August from July and rose 23 percent in Beijing, according to data compiled by Soufun.com, the nation’s largest property website. Prices in Beijing gained 12.3 percent from the previous month and rose almost 7 percent in Shenzhen, according to Soufun.
The Chinese cities of Hangzhou and Chongqing may follow Shanghai in tightening property market policies, the Citigroup analysts said. Shenzhen on Oct. 1 limited local residents’ home purchases to two and those from outside the city to one, seeking to lower transaction volumes, according to a *censored* International Securities Ltd. report dated Oct. 4.
There’s an increased risk of the government issuing new tightening measures such as the property tax and the “full” enforcement of the land appreciation tax, Nomura Holdings Inc. analysts Alvin Wong and Sunny Tam said in an Oct. 4 report that rated China’s property stocks “cautious” in new coverage.
Average residential prices may fall 5 percent to 10 percent by the end of next year, according to the brokerage.
Hong Kong will introduce rent-to-own subsidized housing after a public outcry over surging home prices, the South China Morning Post reported Sept. 16, citing an unidentified official. The city’s housing prices rose 1.61 percent in the week ended Sept. 26 from a week earlier to the highest level since December 1997, Centaline Property Agency Ltd. said Sept. 30.
--Zheng Lifei, Zhang Dingmin. Editors: Andreea Papuc, Malcolm Scott.