* Five cities loosen property controls to support cooling
* More cities are expected to follow suit-analysts
* Beijing likely to allow more tweaks to support slowing
(Adds sales data)
By Xiaoyi Shao and Koh Gui Qing
BEIJING, May 6 More Chinese cities are rolling
out measures to encourage home purchases, in a sign that local
governments are increasing efforts to safeguard an important
driver of growth in China's faltering economy.
The loosening of home purchase rules in the eastern city of
Tongling in Anhui province and Ningbo, the coastal city of
eastern Zhejiang province, follows several other smaller
stimulus steps in recent weeks to juice the world's
Tongling has introduced steps including providing tax
subsidies to first-home buyers, and cutting down-payment rates
to 20 percent from 30 percent for select buyers, the city
government said on its website on Monday.
Ningbo has also relaxed home purchase restrictions, the
official China Securities Journal newspaper reported on Tuesday,
quoting a meeting held by a local industry association.
By relaxing the rules, local governments are effectively
reversing a near-five-year-old policy of reining in China's
frothy property market, underscoring policymakers' resolve to
support an economy growing at its slowest pace in
Analysts believe the health of China's property market will
likely influence whether Asia's economic powerhouse suffers a
shallow or deep downturn, noting that the real estate sector
accounts for about 17 percent of the country's total annual
China's growth engine has lost steam in the past year,
squeezed by lacklustre demand for exports and the government's
push to cut its own investment in a bid to reshape the economy.
Given slackening growth, Beijing will likely back local
government efforts to support the housing market lest a collapse
in prices jolts the economy and undermines its reform drive, the
"If property activity weakens further, we think the (central)
government may allow various local governments to relax home
purchase restrictions and cut down the current hefty
down-payment requirements," economists at UBS said in a note to
The latest moves follow recent similar measures by three
other cities -- the southern city of Nanning, the eastern city
of Wuxi and the Xiaoshan district in the eastern city of
Hangzhou -- to ease rules for buying homes or land.
A cooling property market pressures the incomes of local
governments, which depend on the real estate sector for a
substantial part of their proceeds.
Data from the land ministry showed in April that residential
land price inflation cooled for the first time in nearly two
years in the first quarter, and is likely to ease further.
The steps in the housing market join other measures by
Beijing to shore up the economy, even though it has ruled out
the use of major stimulus to fight short-term dips in growth.
Recent measures include the relaxation of reserve
requirements for some rural banks, tax breaks for more companies
to support job creation, and speeding up investment in railways.
For a factbox on the unwinding of the property controls,
please click on
CHANGING THE RULES
So far, the turnaround in China's housing policy is only
confined to small cities. Local governments also do not always
have the support of the central government when loosening
housing controls. Back in 2012, Beijing forced governments in
areas including Wuhu, Foshan and Chengdu to retract their plans
to ease controls on the real estate sector.
Yet, analysts expect Beijing will approve the easing
measures this time, in line with its preference to tailor
policies for different local economies in China.
"There are increasing concerns of a turning point for the
property market," said Liu Yuan, the head of research at the
property consultancy Centaline in Shanghai. "We expect the
central government would react differently this time."
China's new home sales in terms of floor space in 54 major
cities dropped 25 percent in first four months of 2014 from a
year ago, data from Centaline showed.
The trend of easing demand for housing continued to early
May. These cities saw home sales falling 47 percent from a year
earlier in the first three days of May during the Labour Day
holiday, it added.
China's home prices rose at double-digit rates in most
cities last year, but the market started cooling since late 2013
as authorities clamped down on speculation, and as banks made it
harder for buyers and small developers to get loans.
"Our baseline remains that the government will have to
loosen fiscal, monetary and property-sector policies
significantly to achieve our forecast 7.4 percent GDP growth in
2014," Zhang Zhiwei, economist for Nomura said in a note to
(Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Shri
Navaratnam and Jacqueline Wong)