April 29, 2014 / 10:06 AM / 3 years ago

UPDATE 1-China city eases property rules, fuelling speculation others may follow

(Adds analyst, developer quotes)

By Clare Jim and Aileen Wang

HONG KONG/BEIJING, April 29 (Reuters) - A city in southern China has eased rules on house buying as it looks to boost the local economy, raising speculation this could be the start of a series of local level support measures.

House prices in China rose at double-digit rates in most cities last year, but the pace of gains has slowed since January as central government measures to rein in price gains took effect, weighing on some local governments.

Residents of an economic zone near the city of Nanning in the southern province of Guangxi will be given the right to buy property in the city, according to an article on the official Xinhua news agency's affiliated XinhuaNet website.

The article, citing a document from the Nanning city housing department, said the move would grant residents of the zone the same rights to buy property as city dwellers.

"The loosening measures of Wuxi and Nanning are very strategic in the sense that they only involve non-town centres," said Rosealea Yao, an analyst at research company Gavekal Dragonomics based in Beijing.

Yao was referring to recent measures also in the city of Wuxi that lowered the requirement for property buyers to qualify for a local household registration.

"I think there's some room for other local governments to ease policies targeting the suburban areas, because it won't stimulate speculative demand," she added.

An official of the Nanning housing department told Reuters that the document on the new rules was drawn up based on minutes from a recent meeting, but could not confirm the content.

One Chinese property developer questioned why Nanning authorities had chosen to make the measures public.

"It's silly for Nanning to announce officially. Other local governments will likely implement under the table," said the developer, who declined to be named due to the sensitive nature of the subject.

The company added that there were instances where Beijing had forced some local governments to withdraw new measures just 48 hours after they were implemented. It provided no details.

As prices cool, speculation about a relaxation of policy has swirled in some markets.

Other cities that are seeing the steepest corrections in prices due to excess supply, including Hangzhou and Wenzhou in eastern China and Changsha in the south-central region, are also considering easing rules, according to property developers.

The developers, who have been approached by local governments to discuss the impact of any loosening, said the cities were likely to lift restrictions on purchases of second homes. But the measures might not be announced publicly, they added, as that would run contrary to China's strict housing policy.

Local governments are very dependent on housing and land sales for revenue to boost their economies, but have had to curb real estate markets at the behest of the central government, which is concerned about the risk of a housing bubble.

Additional reporting by Jenny Su and Jonathan Standing in Beijing; Editing by Anne Marie Roantree and Jacqueline Wong

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