Business / Industries

Policy may cap soaring home prices

By Hu Yuanyuan and Jing Shuiyu (China Daily) Updated: 2016-08-13 07:35

Policy may cap soaring home prices

A property construction site in Huai'an, Jiangsu province. [Photo provided to China Daily]

Tighter policies to regulate soaring housing prices in some red-hot cities are in the pipeline, industry analysts said.

"In the second half of the year, deleveraging from the houses purchased with high debt will become mainstream policy in cities such as Hangzhou and Tianjin where prices are rising too fast," Centaline Property chief analyst Zhang Dawei wrote in a research note on Friday.

Suzhou and Nanjing, two cities in Jiangsu province where home prices topped the list of the month-on-month growth rates for the past several months, started to tighten credit policy by increasing the down payment ratio for homebuyers, according to a government statement on Thursday.

Even though the direct impact of the policies announced in Suzhou and Nanjing are limited, it represented the beginning of a new round of tighter regulations, Zhang wrote.

In Suzhou, for instance, if the households haven't paid off the bank loans for the first home, the mandatory down payment for their second home will increase from the existing 40 percent of the total expense to 50 percent. If they already have loans for two residences, their applications for mortgages to purchase new homes will be rejected.

Skyrocketing housing prices in some cities are mainly due to easy credit policies, which have led to severe housing speculation, Zhang said.

The narrow measure of money supply, which covers cash in circulation plus demand deposits, reached 44.36 trillion yuan ($6.68 trillion) in the first half of the year, up 24.6 percent from the same period last year, according to data from People's Bank of China, the central bank.

"First-tier cities, however, are unlikely to introduce such tighter policies because the markets are very stable," said Guo Yi, marketing director of the real estate consultancy company Yahao Real Estate Selling and Consulting Solution Agency. "The scarcity of land resources is causing high prices as urbanization develops. It is impossible to regulate the property market through the supply of land."

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