Policies: Cities vie to attract talent, but homes pricier

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Centaline Shanghai’s Lu attributed the stable home prices in top-tier cities to the most drastic measures ever adopted. “Comparatively, the tightening policies of second-tier cities are less stringent, and the market is becoming more and more tolerant toward the new measures that are getting stricter gradually.”

According to Zhang of Centaline Propety Agency, rising home prices in most second-tier cities have a lot to do with their policies for attracting talented professionals and skilled workers. One more reason is the lottery system that was introduced in some cities for new home purchases.

“More than 40 cities including Nanjing, Wuhan, Chengdu, Xi’an and Changsha announced a variety of favorable policies to attract talents such as offering local residence registration, setting up residential subsidiaries, and granting rent-free office areas. These policies may partly offset previous purchase limits in these cities,” Zhang said.

“In addition, 10 cities — Shanghai, Nanjing, Changsha, Chengdu, Hangzhou, Xi’an, Wuhan, Shenzhen, Qingdao and Fuzhou — introduced a lottery system for new home purchases, which has given homebuyers an impression that homes are in short supply.”

The latest round of tightening policies can be traced back to September 2016, when several cities started to put limits on home purchases. Such policies later spread nationwide in March 2017.

“Policy tightening centered on top-tier cities and tier-2 cities in the beginning, and started to penetrate into the rest of second-tier cities and some lower-tier cities,” said Xu Xiaole, chief market analyst with the Ke Research Institute, a research organization under the aegis of online real estate brokerage platform Ke.

Compared to previous tightening policies, Xu said the latest campaign has set up a record in terms of its scale, frequency and intensity. But to make such policies effective, what is required is high level of systematization and integrity, experts said.

“We are in the middle of establishing a long-term mechanism, including allowing equal rights for renting and buying properties, restructuring supply and demand in the sector,” said Chen Sheng, president of the China Real Estate Data Academy.

Chen further said China’s leadership appear to believe that existing measures seeking short-term market stability are not adequate.

Experts are unanimous that the real estate sector will see harsher rules in the second half of this year to achieve the twin goals of stable home prices and the establishment of a long-term mechanism for that.

The Beijing residential market will see more co-ownership housing and limited-price housing in the second half due to the government’s continual regulation of housing investment speculation, market insiders said.

“The two kinds of houses are conducive to the current status of the residential market; as a result, they are expected to see rapid development,” said Li Xiang, senior manager of the research and consultancy department of Savills.

Co-ownership houses could satisfy the demand from low-end customers. Such homes come at relatively lower prices, and limitedprice houses could meet the demand from middle- and high-end customers for their price transparency, Li said.

According to Xu of the Ke Research Institute, as China has embraced urbanization, cities in major city clusters will be full of opportunities, but lower-tier cities with high stock of unsold housing units or sustained feverish bids for land parcels may hide risks.

“In recent months, lowertier cities are stealing the thunder of the home market from big cities as their housing prices continue to rise, thanks to fewer purchase restrictions. But major cities will regain their position as the hot spots for homebuyers. So, investing in lower-tier cities will face a risk of difficulty in recovering cost,” said Lu of Centaline Shanghai.

“Especially third- and fourth-tier cities that don’t have enough population and a strong industrial base to support their property prices are the places to avoid for investors,” Chen of the CREDA warned.

Yan Yuejin, director of the E-house China Research and Development Institution, a Shanghai-based real estate information and research services provider, said this is a situation that requires more practical measures at a fundamental level from local governments to discourage home prices from soaring. “The ultimate task of the macro policies is to lower the cost of homes for homebuyers.”