Property purchase limits extended to lower-tier cities

People move into a social housing project in Chongqing.[Photo / Agencies]

BEIJING – China will restrict house purchases in more second- and third-tier cities that witness excessive property price growth, reflecting its determination to avert a speculative real estate bubble. 

According to a statement posted on the central government’s official website ( on Thursday, China will continue to strictly implement property tightening measures to discourage speculators.

A State Council meeting, chaired by Premier Wen Jiabao, also urged cities with sharp rises in property prices to step up their efforts to cool the property market and meet targets for affordable public housing. 

“It is right for the government to do something to cool down the market and bring it back to a normal track. These reaffirmed measures will help ensure sustainable growth of the property sector,” said Justin Chiu, executive director of Cheung Kong (Holding) Ltd. 

Although property prices in first-tier cities, such as Beijing and Shanghai, have been stabilized by rigorous measures, especially the policy to restrict the number of houses a family could purchase, transactions and prices in lower-tier cities have recently experienced a rebound. 

That was partly confirmed by data from the National Bureau of Statistics (NBS). Property sales jumped to 499.2 billion yuan ($77 billion) in June, compared with 380.9 billion yuan ($$59 billion) in the previous month, according to the NBS. 

Some large developers, especially those having a big presence in second- and third-tier cities, also recorded robust sales in the first half. 

China Vanke Co, the country’s biggest developer by market value, reported last week that sales in the first six months rose 79 percent to 65.7 billion yuan, while Evergrande Real Estate Group said on July 11 that sales more than doubled to 42.3 billion yuan. 

“It is critical for the government to reiterate its tightening measures, as some governments, especially those of lower-tier cities, are expecting a possible loosening up in real estate policies since their revenue from selling land is dropping due to flat property sales in the first half,” said Qin Xiaomei, chief researcher at international real estate service provider Jones Lang LaSalle. 

The reiteration of the government’s determination to cool the property sector is also based on newly released economic figures that point to a soft landing, according to Grant Ji, director of the investment department of the real estate service provider, Savills (Beijing). 

According to the NBS, the economy grew 9.5 percent in the second quarter, beating expectations and easing concerns over a hard landing amid tight monetary policies targeting high inflation. 

With the supply of low-cost housing picking up and the continued tighter regulations governing the commercial residential sector, most experts said property prices would drop in the coming six months. 

“Property transactions will remain sluggish in the second half, with property prices falling in some cities, though a dramatic decrease is unlikely,” said Danny Ma, senior director of CBRE Research China, 

He added that as property developers’ cash flow further tightens, they are more willing to cut prices to stimulate sales. 

Meanwhile, commercial banks are halting individual property loans in the face of a tightening monetary policy and limited lending quotas, the China Securities Journal reported on Thursday. 

Wang Ying in Shanghai contributed to this story. 

China Daily

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