Chinese government has pledged a tougher stance on curbing rising home prices to prevent liquidity from flowing into the real estate market when the world’s second largest economy is looking to policy easing to support the economy crimped by slowing domestic demand and escalating trade tensions.
China’s Politburo, composed of the country’s 25 most senior leaders, has reiterated its stance on home price, saying it’s an important mission to curb any gains in home prices, compared to the previous wording of curing excessive gains, at a meeting chaired Chinese President Xi Jinxing on Monday
The change in the tone is viewed as a signal that the government will look to stem increases in the price of all homes across the country.
There has been some expectation on property policy easing lately, but the government sent a clear message yesterday that curbs will tighten rather than loosen,” said Yan Yuejin, research director at E-House China, a real estate research agency.
The officials also said that China will carry out changes resolutely and with great determination, indicating that more control measures will be brought in when they are necessary, said Yan.
Responding to the changing tone of the policymakers, shares of Chinese real estate developers plunged on Monday.
On the same day, Shenzhen, one of China’s four top-tier cities introduced stricter restrictions on home purchase, measures including banning companies and institutions from buying homes, a popular loophole to bypass buying restrictions, and barring residents buying commercial homes from reselling them for three years from the date of obtaining the real estate deed.
The restrictions in Shenzhen are viewed as a signal that any price increases elsewhere in the second half may be followed by curbs.
The message from the Politburo meeting and news restrictive measures over the real estate sector in Shenzhen show Chinese authorities are concerned that the easier liquidity will again flow into the property market and flare up price bubbles, Haitong Securities analysts led by Tu Lilei wrote in a note Wednesday.
Chinese developers fell in Hong Kong, led by Country Garden Holdings Co., which closed down 6.6 per cent. China Vanke Co. fell 3 per cent, and China Overseas Land & Investment Ltd. dropped 2.6 per cent.