Key Chinese Cities Issue New Housing Policies To Curb Prices

--Announcements Come Ahead of Party Congress, In Effort to Reinforce Gov't

Policy

--Cities Worried About Price Pressure From 'Golden September, Silver October'

     BEIJING (MNI) - Eight Chinese cities issued new policies over the weekend

either strengthening management or tightening regulations of their local

property markets, a signal that the Chinese government is increasing efforts to

control housing prices ahead of the 19th Communist Party Congress that begins

Oct. 18.

     Seven provincial capital cities -- Nanchang of Jiangxi Province, Xi'an of

Shaanxi Province, Changsha of Hunan Province, Nanning of Guangxi Province,

Guiyang of Guizhou Province, Shijiazhuang of Hebei Province and Wuhan of Hubei

Province, together with Chongqing City, issued new property market policies.

     "China's 19th Congress is approaching, officials from these cities all want

to show their support for the central government's curbs on the property sector

and the central government's policy that 'houses are not for speculation'

policy," Yang Hongxu, deputy head of the research department at E-House, a

Shanghai-based real estate consultancy, told MNI.

     Housing price growth rates in these cities are already some of the fastest

nationally, triggering concern that prices could surge during the "Golden

September and Silver October" period that traditionally sees robust sales and

price growth, Yang said.

     If that were to happen, "it would hurt the central government's plan to

control the property market" ahead of the party congress, Yang said.

     The policies mainly focus on extending the waiting time before a property

can be resold on the secondary market, with Shijiazhuang, Changsha and Guiyang

extending it to three years; and Chongqing and Nanchang extending it to two

years. Nanning extended the wait time to two years for homes purchased by

families who already own more than one property.

     Wuhan and Xi'an, on the other hand, sought tighter management of the

property sector. Wuhan now forbids property companies from collecting down

payments and other fees from home buyers before they have received a presale

license, and also prohibits companies from hoarding new unsold housing units to

avoid government restrictions on listing prices of new houses. Xi'an

strengthened management over pricing registration for new housing projects,

requiring all property companies to apply for approval for listing prices and

approval for adjustment of housing prices.

     "The reason the governments are stressing extending the waiting period

instead of limiting purchase quotas this time is because these cities need to

control housing prices but also need to reduce unsold housing inventories," Yan

Yuejin, director of the research department of E-House, said in a note. "Placing

restrictions on housing sales in the secondary market will help cut inventories,

but can also prevent short-term capital from cashing out."

     Zhang Dawei, chief economist of Centaline Group, a real estate sales

company, said in a note that the fact that the policies were issued so

intensively in such a short time indicated the cities were "obviously under

pressure from the Ministry of Housing and Urban-Rural Development" to upgrade

their curbs on the property sector.

     The extension of waiting-time rules will actually help deleverage the

property market, as it will rein in speculation and make it less attractive for

highly leveraged capital to enter these markets, Zhang said.

     E-house's Yang, however, said this round of policy tightening is more of an

"attitude declaration" -- meaning the Chinese government wants to signal its

stance that it will continue to strengthen controls on the sector.

     "Actually, the policies are relatively loose," Yang told MNI, given that

the waiting-time extension measures will have less of a direct impact on  prices

than would purchasing quota restrictions. "Thus, the policies are bearish for

the market, but the degree is not large because the policies are not very

strict."

     Given that new housing policies have often been announced in recent years

around the last day of September or the first few days in October, other local

governments could announce tightening of controls.

     Zhang predicted the waiting-time extension policy would spread rapidly to

smaller Tier-3 and Tier-4 cities, with around 50 cities expected to implement

such policies in the near future.

     Yang agreed that more cities would follow the lead of the eight cities that

issued new rules, with the polices spilling over to the remaining provincial

capitals and key Tier-3 cities. 

     Yang predicted that housing sales in the eight cities would not be strong

in October, with price growth likely to slow or flatten. He also said sales in

these cities would shrink next year, with price growth turning negative.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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