Chinese city's property easing a test of central government resolve as economy slows

China Materials 19 December 2018 10:40 (UTC +04:00)

The Chinese city of Heze has reversed a rule designed to curb real estate flipping, boosting shares in property developers on Wednesday and sparking speculation that more cities could follow suit as slowing sales weigh on the economy, Trend reports referring to Reuters.

The policy reversal, announced by the city’s government, was the first of its kind since authorities around the country began taking steps about two years ago to control soaring house prices, according to state-run media.

It comes as China’s economy loses steam and new home price growth slows, particularly in smaller cities like Heze.

In an announcement on its website, Heze’s municipal housing and urban-rural development bureau said it was cancelling provisions introduced last year that required purchasers of new or second-hand homes to hold them for two or three years, depending on their residency status, before being eligible to sell.

The notice, dated Dec. 14 but posted online on Tuesday, did not elaborate.

“The policy itself is quite limited in driving up sales but it sent a strong easing signal,” wrote analysts at Hua Chuang securities, adding they expected “gradually better policy environment” in the future.

But the move by Heze - a city of over 8 million in the coastal Shandong province - will also test the central government’s resolve in keeping the frothy sector in check, some analysts say. President Xi Jinping had vowed this year to stop price growth in a near-three-year boom.

In previous property cycles, attempts to ease property curbs by regional governments were halted by the central authorities as they continued to crack down on real estate speculation.

The semi-official China News Service and the newspaper The Paper reported it was the first clear case of a city doing away with measures restricting home sales.

Growth in China’s new home prices has slowed recently but marked its 43rd straight month of increase in November, up 9.3 percent year-on-year, official data showed.

The Heze housing bureau told state-owned Securities Times that the policy decision was based on local conditions. The news outlet added authorities at the bureau were meeting to study the situation as they had been asked by the Shandong provincial housing bureau for an explanation for the policy change.

Repeated phone calls by Reuters to the Heze housing bureau were not answered. The housing ministry referred to responses by local authorities.

On Wednesday morning the CSI300 Real Estate Index .CSI300REI gained as much 2 percent before easing to around 0.5 percent, while the broader CSI300 Index was down about a third of a percent.

Shares in developers, including Risesun Real Estate Development, China Fortune Land, Poly Real Estate 600048.SS, China Vanke and China Merchants Shekou Industrial Zone were up.