Saturday 26 May 2018

Chinese cities see new property curbs

Hong Kong (stock photo)
Hong Kong (stock photo)

Christopher Anstey and Richard Frost

Moves by several large Chinese cities to put restrictions on home resales suggest a coordinated initiative, coming weeks before a pivotal Communist Party leadership reshuffle.

Property investment has continued to grow, despite previous measures to rein in home-loan growth, which has propelled recent credit expansion in China. The danger is that continued rapid real-estate construction, fuelled by debt, sets the financial system up for defaults down the road.

Among those taking steps is Chongqing, which since July has had an associate of President Xi Jinping - Chen Miner - as its Communist Party boss. Chen is a focus of speculation among China-watchers as a potential candidate for elevation next month.

Property stocks took a tumble after the moves, with one index heading for its steepest drop in more than two years.

Chinese property stocks plunged in Hong Kong after cities added housing curbs, dashing speculation that the authorities would pull back on measures to cool rising prices.

Eight cities, including Chongqing and Nanning, rolled out restrictions last weekend, with most banning home resales within two to three years of purchase, the official Xinhua News Agency reported.

Shanghai-based Tospur Real Estate Consulting Company said six more could follow suit, without naming them.

The latest wave of tightening comes only a week after official data showed home price gains in fewer Chinese cities, fuelling optimism that the authorities may be able to limit additional property curbs. The industry is a focus of policy makers ahead of a twice-a-decade Communist Party congress slated to begin on October 18, as leaders try to cool prices without tanking the economy.

"Policy risk is back in focus in the run-up to mid-October as investors watch whether more cities will follow suit in issuing new controls," said Toni Ho, a Hong Kong-based analyst with RHB Osk Securities Hong Kong.

The latest curbs over a span of only two days show the authorities' resolve and signal that home prices are ending across-the-board gains and may become more closely linked to cities' economic fundamentals, Guotai Junan Securities's Shenzhen-based analysts led by Hou Like wrote in a report on Sunday.

New-home prices, excluding government-subsidised housing, gained in 46 of 70 cities tracked by the government in August, compared with 56 in July, the National Bureau of Statistics said last week, the smallest number of increases since January.

(Bloomberg)

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