Canada's Housing Bubble

Feb. 21 Bloomberg News

Shanghai and Guangzhou joined China’s capital, Beijing, in announcing restrictions on home purchases, responding to property curbs imposed by the central government aimed at preventing a housing bubble.

The two cities will ban local residents who own two or more homes from buying more property and non-local homeowners from making additional purchases, according to the state-run Xinhua News Agency and the Guangzhou Daily on Feb. 19. Other cities with similar plans include Nanjing and Harbin, Xinhua reported.

China extended property curbs last month, including raising the minimum down payment for second-home purchases and introducing taxes on residential properties in Shanghai and Chongqing. The People’s Bank of China announced after the close of markets on Feb. 18 that banks’ reserve ratios will increase from Feb. 24. More cities are expected to follow Shanghai and Guangzhou’s measures in the “near term,” Credit Suisse Group AG said in a report today.

“We expect this round of curbs to have far-reaching impact on the property market as the restrictions on home purchases have been extended almost nationwide,” said Shen Aiqin, an analyst at GF Securities Co. in the southern city of Guangzhou who rates the property industry “neutral.” “Transactions will probably fall by between 10 percent and 20 percent this year.”

Property Stocks Fall

The measure tracking property stocks on the benchmark Shanghai Composite Index fell 0.5 percent as of 9:57 a.m. to the lowest in more than a week. China Vanke Co., the country’s biggest publicly traded developer, lost 1.1 percent to 8.26 yuan, and rival Poly Real Estate Group Co. dropped 0.9 percent to 12.87 yuan.

China’s January new home prices rose from a year earlier in 68 of the 70 cities monitored by the government, defying the new property curbs, the statistics bureau said on Feb. 18. The central bank has boosted reserve requirements eight times since the start of last year and raised interest rates on Feb. 8 for the third time in four months.

The Shanghai and Guangzhou measures follow similar rules in Beijing, where the municipal government added a requirement for non-residents to provide five years of tax documentation to buy apartments in the capital. Families who aren’t residents of Shanghai can’t buy property without showing they paid taxes for at least a year, according to the Xinhua report on Feb. 19.

January new home prices advanced 6.8 percent from last year in Beijing and climbed 1.5 percent in Shanghai, the statistics bureau said. Haikou had the biggest gain, surging 21.6 percent, and 10 cities had increases exceeding 10 percent.

The “new set of property prices showed little impact from administrative measures and tightening policy moves since last year,” Suan Teck Kin, an analyst at United Overseas Bank Ltd., said in a report today. “This would harden the resolve of more tightenings ahead.”

Chinese Premier Wen Jiabao pledged to curb property speculation and add more affordable housing in his Feb. 1 Lunar New Year speech. The country needs to “resolutely control the property market” and keep prices stable, he said.

--Chua Baizhen in Beijing and Zhang Shidong in Shanghai, with assistance from Weiyi Lim in Singapore. Editors: Linus Chua, Andreea Papuc

To contact the reporter on this story: Baizhen Chua in Beijing at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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