August 28, 2017 / 9:47 AM / a year ago

Chinese city, trying to cool home prices, is capping land bids: Xinhua

FILE PHOTO: People ride past a residential complex Changsha, Hunan province, China, September 24, 2016. REUTERS/Yawen Chen

BEIJING (Reuters) - One Chinese city is capping the bids that developers can make in three land auctions in September, the official Xinhua News Agency said on Monday, in an effort to rein in its still-surging home prices.

The ceilings will be imposed in Changsha, capital of Hunan province in southern China.

Xinhua said the rules for the coming auctions is that the winning price cannot be more than 50 percent above the starting bid. In the event that more than one developer puts in the maximum-allowed bid, the winner will be decided by a lucky draw, the state news agency said.

In June, Changsha implemented caps on home prices, under which prices are not supposed to be higher than the average new home price in October 2016.

Local authorities are trying to defuse a property bubble ahead of a key, once-in-five-years national Communist Party congress later this year.

New home prices in Changsha rose 18.3 percent year-on-year in July, according to data from China’s National Bureau of Statistics.

Across the country, property developers have bid aggressively at local land auctions in recent years, betting that China’s red-hot property market will not collapse.

China’s housing market has already shown signs of fading after both property investment growth and home prices cooled in July as regulatory curbs continued to bite.

The government or rural collectives own all land in China, unlike most countries, and parcels it out to developers and homeowners through long-term leases.

Reporting by Stella Qiu and Elias Glenn; Editing by Richard Borsuk

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