Housing prices in Beijing hit their 2016 peak in December and have continued to break records this year. After prices in the secondary market grew 3.3% in February, the municipal government of Beijing launched a number of tighter control measures on the housing market during the past month, with the move coming as part of the city’s efforts to control surging housing prices that are building up household debt, heightening bank’s credit risks, and resentment as home affordability fades.
The round of restrictions during National Day Golden Week holiday last year squeezed the number of secondary market transactions in Beijing by 37% over the fourth quarter, but failed to stop prices rising. In mid-March, the municipal government acted again – raising the minimum down payment on a second home to 60% from 50%. On bigger homes, that minimum increases to 80% from 70%. They also temporarily halted issuing individual mortgage loans of more than 25 years, effectively forcing borrowers to take on more expensive shorter loans. Buying a third apartment has already been banned. And the definition of a second-home buyer has been broadened to include anyone who has a record of taking out a previous mortgage anywhere in China. Beijing has also curbed individuals buying new commercial property, and closed a loophole in buyers faking divorce to take advantage of first-home down payment rates.
On 3 April, the Beijing Municipal Commission of Housing and Urban-Rural Development extended the purchasing controls to include residential bungalow transactions. Bungalows in Beijing are mainly in Dongcheng District and Xicheng District where many famous schools are located at. Since bungalows are not included in the previous rounds of control measures, they are sought by investors and speculators resulting in a substantial increase in their prices. The latest measures wholly plug loopholes of property speculation and reaffirmed the government’s stand that “houses are built to be inhabited, not for speculation”.
The housing ministry said Beijing’s tightening experience deserved to be studies by the rest of the country. Other cities like Shijiazhuang, the capital of neighbouring Hebei province, the city of Guangzhou in southern China, and Zhengzhou, the capital of central Henan province, have rolled out similar measures to rein in property market speculation. With the stricter control on Beijing’s housing market, speculation is unlikely to happen in the capital and transactions may plunge in short term. Smaller cities may become bright spot as demand of property investors spills over.